Spot rate : Yen / US : 108.68 Forward rate: Yen / US: 108.45 what is the forward premium/ discount? A. .21% B. 2.54% I have eliminated the brainless part of the question Book 6 Exam 03 AM #42.
dollar at a discount. 0.21
that is the one month forward rate…does the forward discount rate always have to be in annual terms??
should be B. because they give you the one month forward, which has to be “converted” into 12months.
A, discount
Where have they mentioned one month
It will ask for the premium/discount, or the “annualized” premium/discount. This doesn’t ask for annualized.
i apologize it does ask for the annualized forward premium or discount…i forgot to put that part in…must explain why i couldn’t figure out what i was doing wrong
nm.
B if its one month annualized else A (Discount in both the cases)
How do you know whether the question asks for fwd prem/disc for US or Yen ?
In this case, a USD buys less Yen in the future, so the Yen trades at a forward premium; the USD trades at a forward discount because one yen buys more USD in the future. See Joey’s response to my similar question… http://www.analystforum.com/phorums/read.php?11,632514
sarathk Wrote: ------------------------------------------------------- > How do you know whether the question asks for fwd > prem/disc for US or Yen ? this would be specified in the full question