Question

On June 1, 2020, the Euro had a spot rate of .9098 per USD. The 3-month forward rate of the Euro was .9123 on that date. What is the Euro's forward premium or discount?

	A.	1.52% forward discount
	B.	1.52% forward premium
	C.	1.1% forward discount
	D.	1.1% forward premium

Answer 1

- Spot Rate = Euro 0.9098 per USD

3-month Forward rate = Euro 0.9123 per USD

Calculating Euro's forward premium or discount:-

Forward premium = [(Forward rate - Spot rate)/Spot rate]*(12 months/3months)*100

Forward premium = [(0.9123 - 0.9098)/0.9098]*(12 months/3months)*100

Forward premium = 1.10%

So, the Euro's forward premium is 1.10%

Option D

If you need any clarification, you can ask in comments.    

If you like my answer, then please up-vote as it will be motivating