Question

The Current spot quote for CS is $0.9850-60. If you buy $10,000 at the current rate, it will cost you C$10, 152.28. True or False

The spot rate on the British pound is 1.2450. If the current interest rate on the British pound is 3% on the US$ is 2%, the six-month equilibrium forward on British pound is?

The spot and 180-day forward rates for the SFr are $0.7350 and $0.7406, respectively. The SFr is said to be selling at an annualized forward?

Answer 1

The exchange rate is $0.9850 -0.9860 . The traders can buy $10000 then we have to sell CS which is the base currency in the excahnge rate.

the amount it will cost = 10000/ 0.9850 = CS$10152.28 .

So the statement is TRUE.

As per IRP the below relation holds good.

Forward rate / spot rate = ( 1 + interest rate on price currency) / ( 1 + interest rate on base currency)

Forward rate = 1.2450 8 ( 1.02/1.03)*0.5

= 1.2389

The forward rate is higher than the spot rate . Also the base currency is the exchange rate is SFr. Hence the Sfr is said to be selling at an annualized forward premium.