If the spot rate of the British pound is $2.2, and the 180-day forward rate is...

Question

Question

business finance

Answer 1

Answer #1

It is quoted at a premium since the forward rate is higher than the spot rate.

Premium= $2.25 - $2.2 = $0.05

Annualized premium = ($0.05/$2.2) * (12/6) * 100 = 4.54%

Answer 2

Similar Homework Help Questions

The spot rate of the British pound to the dollar is $1.15. The 180-day forward rate...

The spot rate of the British pound to the dollar is $1.15. The 180-day forward rate is $1.17. Thus, the approximate annualized forward premium is _________.
Suppose the spot rate and forward rate for the British pound are $1.25/₤ and $1.2/₤ respectively....

Suppose the spot rate and forward rate for the British pound are $1.25/₤ and $1.2/₤ respectively. Assume the forward pound is selling at an 8% (annualized) discount, what is the number of days of the forward contract? a. 60 days b. 90 days c. 180 days d. 30 days
The spot rate on the London market is £0.5500/$, while the 90-day forward rate is £0.5579/$....

The spot rate on the London market is £0.5500/$, while the 90-day forward rate is £0.5579/$. What is the annualized forward premium or discount on the British pound? (Round answer to 2 decimal places, e.g. 17.54%. Use 360 days for calculation.) Please write out the equation. I am trying to teach myself.

1. Assume the following information: 180-day U.S. interest rate 180-day British interest rate 180 day forward...

1. Assume the following information: 180-day U.S. interest rate 180-day British interest rate 180 day forward rate of British pound Spot rate of British pound 8% 9% $1.50 $1.48 Assume that a US firm will receive 400,000 pounds in 180 days. Would it be better off using a forward hedee or a money market hedge? Substantiate your answer with estimated revenues for each tune hedge. h. Assume that a US firm will pay 400,000 pounds in 180 days. Would it...
Given that the spot rate is 1.5 euros per pound and the forward euro-pound exchange rate...

Given that the spot rate is 1.5 euros per pound and the forward euro-pound exchange rate is 1.575 euros per pound calculate the forward premium discDunt on the British pound and indicate which of the two it is. Consider a Dutch investor with 1 000 euros to pace in a bank deposit in either the Netherlands or Great Britain. The one-year interest rate on bank deposits is 2% in Britain and 4.04% in the Netherlands. The one year forward euro-pound...
The 90-day forward rate for the euro is $1.08, while the current spot rate of the...

The 90-day forward rate for the euro is $1.08, while the current spot rate of the euro is $1.05. What is the annualized forward premium or discount of the euro? 11.4% discount 11.4% premium 7.6% premium 7.6% discount

The one-year forward rate of the British pound is $1.3985, while the current spot rate is...

The one-year forward rate of the British pound is $1.3985, while the current spot rate is $1.2239. Based on the forward rate, what is the expected percentage change in the British pound over the next year? Round to four decimals. Example: 0.1234
The SF/$ spot exchange rate is SF1.26/$ and the 180-day forward exchange rate is SF1.32/$. What...

The SF/$ spot exchange rate is SF1.26/$ and the 180-day forward exchange rate is SF1.32/$. What is the forward premium or discount? If you are a Switzerland based exporter expecting $500,000 dollar receivables in 6 months, would you hedge your dollar receivables using a forward contract? How?
Assume the following information: Current spot rate of British Pound =$1.60 1-year forward rate (as of...

Assume the following information: Current spot rate of British Pound =$1.60 1-year forward rate (as of today) for British Pound =$1.65 Expected spot rate one year from today=$1.67 Rate on 1-year deposits denominated in British Pound =2% Rate on 1-year deposits denominated in A$ =4% From the perspective of Australian investors with AUD1, 600 or GBP 1000, what is the rate of return yielded from the covered interest arbitrage??

Spot $ 0.8221 30-day forward $ 0.8542 90-day forward $ 0.8559 180-day forward $ 0.8606 What...

Spot $ 0.8221 30-day forward $ 0.8542 90-day forward $ 0.8559 180-day forward $ 0.8606 What was the 30-day forward premium (or discount) percentage? What was the 90-day forward premium (or discount) percentage? Suppose you executed a 90-day forward contract to exchange 290,000 Swiss francs into U.S. dollars. How many dollars would you get 90 days hence? so for the first question I got 0.544, this was obviously wrong and I know it wont allow me to answer the remaining...