Question

a. If the USDGHS spot rate is 4.5000, and its six-month forward rate has a forward...

a. If the USDGHS spot rate is 4.5000, and its six-month forward rate has a forward premium of 7%. The Chief financial officer of your MNC wants to know the one year forward rate of the USD?.

b. If the spot rate of the USD is GHS4.5850, find the periodic as well as the annualized forward discount or premium if the 60-day forward rate is quoted as GHS4.6100

c. Distinguish between the following

a) Put Option and a swap

b) Spot foreign exchange rate and forward rates

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Answer #1


A foreign exchange spot transaction, also known as FX spot, is an agreement between two parties to buy one currency against selling another currency at an agreed price for settlement on the spot date. Theexchange rate at which the transaction is done is called the spot exchange rate.
Contrary to a spot rate, a forward rate is used to quote a financial transaction that takes place on a future date and is the settlement price of a forward contract. However, depending on thesecurity being traded, the forward rate can be calculated using the spot rate.

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