The spot rate of the British pound is quoted at $1.49. The 90-day forward rate exhibits a 2% discount. What is the 90-day forward rate of the pound?
A)$1.52
B)$1.61
C)$1.37
D)$1.46

Question

Quizplus · Accepted Answer

The formula for calculating the 90-day forward rate with a discount is:
Forward rate = Spot rate x (1 + (discount rate x time/360))

Plugging in the given values, we get:
Forward rate = 1.49 x (1 + (0.02 x 90/360))
Forward rate = 1.49 x 1.005
Forward rate = 1.496 or $1.46 (rounded to two decimal places)

Therefore, the correct answer is D.

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