The spot rate of the British pound to the dollar is 1.68 ($/≤,).The 180 day forward rate is $1.71,the annualized forward premium is:

Question

Quizplus · Accepted Answer

The annualized forward premium can be calculated using the formula:

Annualized Forward Premium = [(Forward Rate - Spot Rate)/Spot Rate] x (360/number of days in the forward contract)

Here, the number of days in the forward contract is 180.

Substituting the given values:

Annualized Forward Premium = [(1.71 - 1.68)/1.68] x (360/180)

Annualized Forward Premium = (0.018 x 2) x 100

Annualized Forward Premium = 3.636%

Therefore, the answer is B, 3.636%.

The Spot Rate of the British Pound to the Dollar