The spot exchange rate #110/$ has a 90 day forward premium of 12 percent APR. The...

Question

Question

The spot exchange rate #110/$ has a 90 day forward premium of 12 percent APR. The 90 day forward exchange rate is: Multiple C

Answer 1

Answer #1

The 90 forward exchange rate is computed as shown below:

Let the forward exchange rate be Y.

APR = (Y - Yen 110 ) / Yen 110 x 360 / 90

0.12 = (Y - Yen 110 ) / Yen 110 x 4

0.12 / 4 = ( Y - Yen 110 ) / Yen 110

Yen 3.3 = Y - Yen 110

Y = Yen 113.3 / $ 1

Feel free to ask in case of any query relating to this question

Answer 2

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