Final answer:
The number of forward points for a 270-day forward rate is calculated using the interest rate differential between the two currencies and the given period. However, the given options do not match the calculated result, indicating a possible error in the provided figures or the method proposed.
Step-by-step explanation:
To determine the number of forward points for a 270-day forward rate (FGBP/EUR), we need to account for the interest rate differential between the two currencies. The formula to calculate the forward points is [(1 + interest rate of the quote currency) / (1 + interest rate of the base currency) - 1] * (days to delivery/360)] * spot rate. Using the given annualized 270-day LIBOR rates for EUR (1.370%) and GBP (1.325%), and the spot GBP/EUR exchange rate of 0.8489, we plug these figures into the equation to calculate forward points.
Firstly, we convert the annual rates to the equivalent rates for a 270-day period:
EUR 270-day rate = 1.370% * (270/360) = 1.0275%,
GBP 270-day rate = 1.325% * (270/360) = 0.99375%.
Then we apply the formula to find the forward exchange rate and subtract the spot rate to get the forward points:
Forward rate = [(1 + 0.010275) / (1 + 0.0099375)] * spot rate = 1.0003358 * 0.8489 ≈ 0.8497.
Forward points = (Forward rate - spot rate) * 10,000 = (0.8497 - 0.8489) * 10,000 ≈ 8 points.
The answer is therefore not listed among the provided options, which indicates a possible mistake in either the question or the method of calculation proposed. A forward rate calculation should consider the interest rate differential and the period of interest, and the result should be compared to the spot rate to determine the number of forward points.