Question

"The one-year forward rate of the British pound is $1.55, while the current spot rate is $1.60. Based on the forward rate, what is the expected percentage change in the British pound over the next year

Answer 1

Answer:

-3.125%

Explanation:

The percentage change in the British pound is determined as the difference between the one-year forward rate ($1.55) and the current spot rate ($1.60), divided by the current spot rate, and then multiplied by 100%:

$P = \frac{\ 1.55-\ 1.60}{\ 1.60}*100\%\\ P=-3.125\%$

Over the next year, the British pound will change by -3.125%.