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.
Homework Answers
Annualized forward premium or discount = ((Forward-Spot)/Spot )*(360/90)*100%
= ((0.5579-0.5500)/0.5500)*(360/90)*100%
= 0.014364*4*100%
= 5.75%
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