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DochEvi [55]
3 years ago
9

The one-year forward rate of the British pound is quoted at $1.50, and the spot rate of the British pound is quoted at $1.515. T

he forward ____ is ____ percent.
Business
1 answer:
Andrews [41]3 years ago
3 0

Answer: a. discount; 1.0

Explanation:

When the forward rate is higher than the spot rate, the rate is said to be a <em>Premium</em>. When the opposite holds true then the rate is said to be a <em>discount. </em>

Calculating the rate;

= \frac{1.515-1.5}{1.515}

= 0.99

= 1.0

Forward rate is lower so this is a discount.

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