Question

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

Answer 1

The question is incomplete. The complete question is :

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. The forward ________ is _______ percent.

Solution :

The future yield of any bond is known as the Forward Rate. It is the interest rate that is applicable to any financial transaction which will occur in the future.

According to the question,

The forward rate of the British pound for one year is = $ 1.60

The spot rate of the British pound is = $ 1.63

Therefore,

`$=\frac{\text{Forward rate}}{\text{spot rate}}-1$`

`$=(1.60)/(1.63)-1$`

= 0.98 - 1

= -0.018

Thus it is forward discount and the percentage is 1.8 %

Answer 2

1.84 %

Step-by-step explanation:

Given,

Forward rate of British pound = $1.60

Spot rate of British pound= $1.63

We have to find forward discount.

Now,

The spot rate is greater than the forward rate then it is forward discount.

Forward discount=
`(1.63-1.60)/(1.63)`

= 1.84 %

Hence, forward discount percent is 1.84%.