Which of the following is correct if the spot exchange rate on the pound sterling is $2.56 (Canadian)/£ and the one-year forward exchange rate is $2.48 (Canadian)/£? The pound is trading:
A)at a 3.13% forward discount relative to the Dollar.
B)at a 3.13% forward premium relative to the Dollar.
C)at a 3.22% forward discount relative to the Dollar.
D)at a 3.22% forward premium relative to the Dollar.

Question

Quizplus · Accepted Answer

The pound is trading at a 3.13% forward discount relative to the Dollar.The forward discount is calculated as (Forward rate - Spot rate) / Spot rate * 100. In this case, the forward discount is (2.48 - 2.56) / 2.56 * 100 = -3.13%.

Which of the Following Is Correct If the Spot Exchange