Question

In: Finance

The Euro -Yen dollar spot rate is £$0.89/¥$. When the45-day forward exchange rate is £$0.90/¥$...

The Euro -Yen dollar spot rate is £$0.89/¥$. When the 45-day forward exchange rate is £$0.90/¥$ then the Euro forward dollar is selling at

discount or premium of _________%

Expert Solution

Euro - Yen Spot rate

£0.89/¥

1.123596

=1/.89

45 - Forward rate

£0.90/¥

1.111111

=1/.90

Since the forward rate is higher than spot rate

Yen is at a premium which means

Euro is selling at discount

therefore discount rate

=((1.11111-1.123596)/1.123596)*(360/45)*100)

-8.89003

% p.a

=(forward - spot )/spot *360/45*100

jeff jeffy answered 2 years ago

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