The 90-day forward rate for the euro is $1.07, while the current spot rate of the euro is $1.05. What is the annualized forward premium or discount of the euro?
A) 1.9 percent discount
B) 1.9 percent premium
C) 7.6 percent premium
D) 7.6 percent discount

Question

Quizplus · Accepted Answer

The forward premium or discount is calculated as ((Forward Rate - Spot Rate) / Spot Rate) * (360/90) * 100. Substituting the given values: (($1.07 - $1.05) / $1.05) * 4 * 100 = 7.6 percent premium.

The 90-Day Forward Rate for the Euro Is $1