The SF/$ 180-day forward exchange rate is SF1.30/$ and the 180 day forward premium is 8 percent.What is the outright spot exchange rate?

Question

Quizplus · Accepted Answer

The outright spot exchange rate can be calculated using the formula:
Spot rate x (1 + forward premium) = Forward rate 
Substituting the given values, we get:
Spot rate x (1 + 0.08) = SF1.30/$
Spot rate x 1.08 = SF1.30/$
Spot rate = SF1.30/$ ÷ 1.08
Spot rate = SF1.2037/$
Therefore, the outright spot exchange rate is SF1.2037/$, which is not one of the given options.

The SF/$ 180-Day Forward Exchange Rate Is SF1