Suppose that the 1-year forward rate of dollar per pound is $1.32,the current spot rate $/pound is $1.20,and the expected future spot rate $/pound is $1.40.The forward premium on the pound is:
A) -6.7%
B) 5.7%
C) 10%
D) 16.7%

Question

Quizplus · Accepted Answer

The forward premium is calculated as ((Forward Rate - Spot Rate) / Spot Rate) * 100. So, ((1.32 - 1.20) / 1.20) * 100 = 10%.

Suppose That the 1-Year Forward Rate of Dollar Per Pound