Assume the spot rate of the Swiss franc is $.62 and the one-year forward rate is $.66. The forward rate exhibits a ____ of ____.
A) premium; about 6 percent
B) discount; about 6 percent
C) discount; about 6.45 percent
D) premium; about 6.45 percent

Question

​Assume the spot rate of the Swiss franc is $.62 and the one-year forward rate is $.66. The forward rate exhibits a ____ of ____.
A) ​premium; about 6 percent
B) ​discount; about 6 percent
C) ​discount; about 6.45 percent
D) ​premium; about 6.45 percent

Quizplus · Accepted Answer

The forward rate of $.66 compared to the spot rate of $.62 shows that the Swiss franc is expected to be more valuable in the future, indicating a premium. The percentage increase from the spot to the forward rate is calculated as (($.66 - $.62) / $.62) * 100 = 6.45%.

​Assume the Spot Rate of the Swiss Franc Is

Assume the Spot Rate of the Swiss Franc Is