The spot exchange rate is 1.57 dollars per pound.The 30-day forward exchange rate is .6211 pounds per dollar.Therefore,pounds in the forward market are selling at a ________ to the current spot rate.

Question

Quizplus · Accepted Answer

The forward exchange rate is .6211 pounds per dollar, which means 1 pound = 1/.6211 dollars = 1.6101 dollars. The spot rate is 1.57 dollars per pound. The difference is 1.6101 - 1.57 = .04 dollars per pound, indicating that pounds are more expensive in the forward market than in the spot market, which is a premium.

The Spot Exchange Rate Is 1