The €/$ spot exchange rate is $1.50/€ and the 90-day forward premium is 10 percent. Find the 90-day forward price.

Question

Quizplus · Accepted Answer

The formula to calculate the forward exchange rate is:

Forward exchange rate = Spot exchange rate x (1 + Forward premium rate)

Using the given values, we get:

Forward exchange rate = 1.50 x (1 + 0.10) 
= 1.50 x 1.10 
= 1.65

Therefore, the 90-day forward price is €1.5375/$ (the inverse of €1/1.65$). Hence, the correct answer is option B.

The €/$ Spot Exchange Rate Is $1