Question

Consider the following exchange rate quotations: Britain (Pound) $1.5501/pound £0.6451/dollar 6-month forward $1.5339/pound £0.6519/dollar Switzerland (Franc)...

Consider the following exchange rate quotations:

Britain (Pound) $1.5501/pound £0.6451/dollar 6-month forward $1.5339/pound £0.6519/dollar

Switzerland (Franc) $0.6683/franc SF1.4963/dollar 6-month forward $0.6717/franc SF1.4888/dollar

Source: Wall Street Journal.
(1) Compute the percentage forward premium or discount per annum of the Swiss franc against the U.S. dollar, in American terms. What is your interpretation of the resulting premium or discount? (2) Compute the percentage forward premium or discount per annum of the British pound against the Swiss franc, in British terms.

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