这道题的题干和选项是不是表述不清晰？

问题如下：

Question

Holding other factors constant, in a well-functioning market, an increase in which of the following will lead to a decline in the forward exchange rate?

选项：

A.spot exchange rate. B.foreign risk-free interest rate. C.domestic risk-free interest rate.

解释：

Solution

1. Incorrect, since an increase in the spot exchange rate typically pushes the forward exchange rate upward, not downward.
2. Incorrect, as an uptick in the international risk-free interest rate typically causes the forward exchange rate to ascend, rather than decline.
3. Correct, based on the arbitrage relationship. The equation for the forward rate is denoted as:F_f/d = S_f/d × [(1 + i_f)/(1 + i_d)]], where Ff/d represents the forward exchange rate, i_f stands for the international risk-free interest rate, and i_d signifies the home country's risk-free interest rate. This formula suggests that when the home country's risk-free interest rate rises, it leads to a drop in the forward exchange rate.

Exchange Rate Calculations

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