Use the following information to answer questions 6-9.
Table 6.1: Spot and Forward Exchange Rates on May 5, 2012.

-Refer to Table 6.1.On May 5,2012,the 1-month forward yen was selling at a:

Question

Use the following information to answer questions 6-9.
Table 6.1: Spot and Forward Exchange Rates on May 5, 2012.
 
-Refer to Table 6.1.On May 5,2012,the 1-month forward yen was selling at a:

Quizplus · Accepted Answer

The 1-month forward yen is selling at a premium of ¥110.775/$ - ¥108.817/$ = ¥1.958/$. To calculate the annualized premium, we use the formula [(Forward Rate – Spot Rate)/Spot Rate] × (360/Number of days to maturity). Substituting the values, we get [(¥1.958/$) ÷ (¥108.817/$)] × (360/30) = 20.22%. Therefore, the correct answer is (B).

Use the Following Information to Answer Questions 6-9