The spot rate for the Singapore dollar is $.588.The 30-day forward rate is $.590.The forward rate contains an annualized __________ of ___________%.

Question

Quizplus · Accepted Answer

The forward rate is higher than the spot rate, so it is at a premium.

To calculate the annualized percentage, we use the formula:

[(Forward rate - Spot rate) / Spot rate] x (360 / days in the forward period) x 100

= [($.590 - $.588) / $.588] x (360 / 30) x 100

= 0.0034 x 12 x 100

= 4.08%

So, the annualized premium is 4.08%, and the correct answer is D.

The Spot Rate for the Singapore Dollar Is