Alright can someone elaborate: Euros are quoted at $1.31 and GBP are quoted at $1.85. Forward contracts on GBP are trading at $1.88. The cross rate for Euro/pound rate and the forward premium or discount on the GBP forward contract relative to the dollar are closest to: Cross rate…Premium or Discount a) 0.708…1.62% Dis b)1.412…1.62% Pre c) 0.708…1.62% Pre d) 1.412…1.62% Dis
Euro to GBP Spot --> 1.31 / 1.85 = .7081 so eliminates b and d For the forward right Spot: 1.85 /pound Forward: 1.88 / pound so pound has appreciated with respect to the . because more are obtained in the future for each pound. So it is a Premium Choice C
EURO/GBP cross rate = 1.85/1.31 = 1.4122 Spot USD/GBP = 1.85 Forward UDD/GBP = 1.88 so means GBP will appreciate with time. 1.88/1.85 - 1 = 1.62162 … premium is answer ‘B’ correct? - Dinesh S
I got B as well
agree with kevin and dinesh I got b) as well.
It says Euro/Pound cross rate. i.e. No. of Euros required to get a pound. So, B is the answer.
I got B.
Yes, answer B is the correct one. Congratulations to you guys…