Which of the Following Statements Is Most Valid

Multiple Choice

Which of the following statements is most valid?

A) The forward exchange rate is higher than the spot exchange rate if the foreign currency risk premium is positive.
B) The currency that pays a higher interest rate trades at a premium in the forward exchange market.
C) The currency that pays a higher interest rate trades at a discount in the forward exchange market.
D) Whether the forward exchange rate is higher than the spot depends on the relative volatilities of interest rates in the two currencies.