If the domestic currency is trading at a forward premium, then relative to the interest rate of the domestic country, the interest rate in the foreign country is most likely:
A lower.
B higher.
C the same.
Solution
B is correct. The currency with the higher (lower) interest rate will always trade at a discount (premium) in the forward market. The lower interest rate in the domestic country will be offset by the appreciation of the domestic country’s currency over the investment horizon.
请老师解释下这个题目。不是说利率高才会导致他国来投资，汇率升高吗？那升水不是代表本币涨价，本国利率高吗？为什么不选A？
