The one-year forward rate of the Japanese yen is quoted at $.013, and the spot rate of Japanese yen is quoted at $.011. The forward ____ is ____ percent.
A) discount; 18.18
B) premium; 18.18
C) discount; 15.38
D) premium; 15.38

Question

The one-year forward rate of the Japanese yen is quoted at $.013, and the spot rate of Japanese yen is quoted at $.011. The forward ____ is ____ percent.​
A) ​discount; 18.18
B) ​premium; 18.18
C) ​discount; 15.38
D) ​premium; 15.38

Quizplus · Accepted Answer

Forward rate - Spot rate = Premium/Discount
$.013 - $.011 = $.002
($.002/$.011) x 100% = 18.18%
Since the forward rate is higher than the spot rate, it is a premium.

The One-Year Forward Rate of the Japanese Yen Is Quoted