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Suppose that on January 1, 1987, the spot rate on the Dutch guilder was $0.39 and...

Suppose that on January 1, 1987, the spot rate on the Dutch guilder was $0.39 and the 180‑day forward rate was $0.40. The difference between the spot and forward rates suggested that

a) interest rates were higher in the U.S. than in the Netherlands

b) the guilder had risen in relation to the dollar

c) the inflation rate in the Netherlands was declining

d) the guilder was expected to fall in value relative to the dollar

Answer is a, BUT I think b is also correct. Guilder has appreciated relative to dollar. Need an explanation

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Suppose that on January 1, 1987, the spot rate on the Dutch guilder was $0.39 and the 180-day forward rate was $0.40. The difference between the spot and forward rates suggested that

Answer :

a) interest rates were higher in the U.S. than the Netherlands

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