Which of the following is correct if the spot exchange rate on the pound sterling is $2.56 (Canadian)/$\le$and the one-year forward exchange rate is $2.48 (Canadian)/$\le$? The pound is trading:
A)At a 3.13% forward discount relative to the Dollar
B)At a 3.13% forward premium relative to the Dollar
C)At a 3.22% forward discount relative to the Dollar
D)At a 3.22% forward premium relative to the Dollar

Question

Quizplus · Accepted Answer

The pound is trading at a forward discount relative to the dollar because the forward exchange rate is lower than the spot exchange rate. The forward discount is calculated as follows:Forward discount = (Spot exchange rate - Forward exchange rate) / Spot exchange rate= (2.56 - 2.48) / 2.56= 0.0313= 3.13%

Which of the Following Is Correct If the Spot Exchange ≤\le≤

Which of the Following Is Correct If the Spot Exchange $\le$