Question

The one-year forward rate of the British pound is quoted at $1.60, and the spot rate of the British pound is quoted at $1.63. Is the forward rate at a discount or a premium, and by what percentage

Answer 1

Answer:

discount; 1.8%

Explanation:

Calculation for the forward rate using this formula

forward rate=(F/S) - 1

Let plug in the formula

forward rate= ($1.60/$1.63) - 1

forward rate= -1.8 percent.

Therefore The forward DISCOUNT is 1.8 percent.