The SF/$ spot exchange rate is SF1.25/$ and the 180 forward premium is 8 percent.What is the outright 180 day forward exchange rate?

Question

Quizplus · Accepted Answer

To calculate the outright 180 day forward exchange rate, we need to add the forward premium to the current spot exchange rate. 
Forward exchange rate = Spot exchange rate + Forward premium
= SF1.25/$ + (8/100 * SF1.25/$)
= SF1.25/$ + SF0.1/$
= SF1.35/$
Therefore, the outright 180 day forward exchange rate is SF1.35/$. Option A) SF1.30/$ is incorrect, option B) SF1.35/$ is correct, and option C) SF6.25/$ is incorrect.

The SF/$ Spot Exchange Rate Is SF1