The spot exchange rate is AUD/MYR2.3550 and 90-day interest rates are 5.25% p.a.in Australia and 12% in Malaysia.Calculate 90-day forward AUD/MYR.Use 365-day years for both countries.

Question

Quizplus · Accepted Answer

The formula to calculate the 90-day forward exchange rate is:

Forward Rate = Spot Rate x (1 + Foreign Interest Rate / 365) / (1 + Domestic Interest Rate / 365) ^ (Days / 365)

Plugging in the given values, we get:

Forward Rate = 2.3550 x (1 + 0.12 / 365) / (1 + 0.0525 / 365) ^ (90 / 365)
Forward Rate = 2.3937 (rounded to 4 decimal places)

Therefore, the correct choice is C) 2.3937.

The Spot Exchange Rate Is AUD/MYR2