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On your dealers screen you have the following quotations: Spot: CHF/USD 0.9140/0.9525 6 month Forward: 21/25 What is the 6 m

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Answer #1

1. 6 month forward quote for CHF/USD will be 0.9161/0.9550 i.e. adding 21bps and 25bps respectively in given spot rates.

2. The spot bid price is 0.9525 CHF/USD and forward bid price is 0.9550 CHF/USD. Since CHF is being sold at premium, the annualized premium rate is:

[(0.9550-0.9525)/0.9525]*12/6 = 0.525%

3. The spot selling rate for Swiss Franc is 0.9140 CHF/USD (or 1CHF=1.09409 USD) while the forward selling rate for Swiss Franc is 0.9161 CHF/USD (or 1CHF = 1.091584). Since a person will have to give lesser amount of dollars in future to purchase CHF, it means CHF is being sold at discount.

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