Question

The spot and 30-day forward rates ($/SF) for the Swiss franc are $.3075 (1.0695) and $.3120(1.0885), respectively. The franc is said to be selling at a forward: a. Premium of 16.88%. b. Premium of 17.56%. c. Discount of 6.39%. d. Discount of 15.10%. e. Discount of 17.31

Answer 1

b. Premium of 17.56%.

Step-by-step explanation:

The computation is shown below:

Given that

Spot price = $0.3075

Forward rate = $0.3120

Now

Forward premium or discount is

= [(Forward rate - Spot rate) ÷ Spot rate] × (12 ÷ months) × 100

= [0.3120-0.3075) ÷ 0.3075 ] × (12 ÷ 1) × 100

= (.0045 ÷ 0.3075) × 12 ÷ 1 × 100

= 17.556 %

= 17.56 %

Hence, the Option B Premium of 17.56% is correct