Question

	Spot Price	9 month forward basis point
MYR/USD	4.3100/4.3250	22/250

What is the forward premium or discount of the MYR/USD based on the 9-month forward maturity assuming a 360-day year?

Ignore interest rate effect

Answer 1

Solution :-

Months Spot Price =

1 MYR = USD 4.3100 - USD 4.3250

Now 9 Months forward basis points = 22 - 250

Therefore 9 Months Forward Rate = 1 MYR = USD 4.3122 - USD 4.3500

Days in 9 months = 270

Annual Days = 360

Now As we see the Value of MYR increase which forward Premium  

Bid Rate Forward Premium =[ ( 4.3122 - 4.3100 ) / 4.3100 ] * 360 / 270 = 0.00068 = 0.068%

Ask Rate Forward Premium = [ ( 4.3500 - 4.3250 ) / 4.3250 ] * 360 / 270 = 0.00771 = 0.771%

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