The spot and 180-day forward rates for the euro are $1.3310 and $1.3402,respectively.The euro is said to be selling at a forward

Question

Quizplus · Accepted Answer

The euro is selling at a forward premium of 1.4% because the forward rate ($1.3402) is higher than the spot rate ($1.3310). The percentage difference is calculated as [(1.3402 - 1.3310) / 1.3310] * 100 = 0.69%, which when rounded and considering the context, seems to be a mistake in calculation. The correct calculation should yield a result closer to 0.69%, indicating a potential error in the provided choices. However, based on the given options, the closest correct interpretation is a premium, not a discount, and the percentage should be recalculated or interpreted correctly from the given context.

The Spot and 180-Day Forward Rates for the Euro Are