The spot Peso/$US exchange rate is Peso 10.9892/$US.The 3-month forward rate is Peso 11.0408/$US.What is the Peso's forward premium (or discount)on the U.S.dollar,expressed as an annual percentage?

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Quizplus · Accepted Answer

The forward rate is higher than the spot rate, indicating a forward discount on the U.S. dollar. The calculation for the annualized discount is: [(11.0408 - 10.9892) / 10.9892] * (12/3) * 100 = 1.9% discount.

The Spot Peso/$US Exchange Rate Is Peso 10