The spot rate of the British pound is quoted at $1.49. The 90-day forward rate exhibits a 2 percent discount. What is the 90-day forward rate of the pound?

Question

Quizplus · Accepted Answer

The 90-day forward rate can be calculated using the formula:

Forward rate = Spot rate x (1 + foreign interest rate) / (1 + domestic interest rate)

Since no interest rates are given in the question, we can use the forward premium or discount to calculate the forward rate:

Forward rate = Spot rate x (1 + forward discount) = 1.49 x (1 - 0.02) = 1.46

Therefore, the 90-day forward rate of the pound is $1.46, which is option D.

The Spot Rate of the British Pound Is Quoted at $1.49