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2. The spot rate of Swiss franc is quoted at $1.065. The annualized forward premium on...

2. The spot rate of Swiss franc is quoted at $1.065. The annualized forward premium on the franc is 8%. What is the 30-day forward rate of the franc? how to get $1.0721/franc

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Answer #1
Spot rate
1 Swiss franc = $1.0650
Annualized forward premium is 8% per year.
So, For 30 days = 8% * 30/365
0.657534 % or 0.00657534

Swiss Franc is at premium. Whenever any currency is at premium or discount in % terms, then discount or premium percentage

is adjusted in reverse currency. So, Forward premium percentage will be added to dollar in respect to Swiss franc.
So, 1 Swiss franc = 1.065 * ( 1 + 0.00657534)
$1.0720
So, 30 days forward rate is $1.0720/Franc
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