Question

he current U.S. dollar-yen spot rate is 125¥/$. If the 90-day forward exchange rate is 127 ¥/$ then the yen is selling at a per annum ________ of ________.

Answer 1

Discount of 6.30%

Step-by-step explanation:

Missing Word: "Per annum (Discount or Premium)"

D = (F - P)/F * 360/n

Forward premium = (127-125)/127 * 360/90

Forward premium = 0.01575 * 4

Forward premium = 0.063

Forward premium = 6.3%