If a foreign currency is quoted in American terms (the direct quote) and the forward rate for a foreign currency is less than the spot rate, the foreign currency is selling at a ________. Group of answer choices forward discount backward premium backward discount forward premium

A currency is said to have a forward discount, compared to another, when the price of the currency in the forward market is lower than the existing price in the spot market.

As established by the theory of hedged parity of interest rates, the difference between the spot exchange rate and the forward exchange rate is related to the interest rates at that term in the corresponding financial markets. Specifically, if the national currency presents a discount in the forward market (the foreign currency presents a premium in the forward market), the interest rate in the national money markets (in said term) will be higher than the one existing in the markets. money from the other country.