Question

US dollars are currently being quoted at a 60-day Spot rate of $1.6050/£. US dollars are also being quoted at a Forward rate of $1.6015/£. Is the dollar at a Forward Premium or Forward Discount and by what annualized percentage?

The Spot Singapore dollar is quoted Bid S$1.7160/US$ and Ask S$1.7200/US$. What is the direct Bid and Ask quote in the United States to the nearest 4 decimal points?

please explain and show all work, thank you!

Answer 1

To calculate forward premium or discount (annualized percentage )

on base currency, formula = F-S/S*100*360/60

On price currency = S-F/F*100*360/60

S=Spot rate

F=forward rate

In this qus pound is base currency,$ is price currency

Direct quote = Price of home currency is quoted in terms of foreign currency(home currency is price currency & foreign currency is base currency)

Indirect quote = Price of foreign currency is quoted in home currency(Foreign currency is price currency & home currency is base currency)