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 _________%

Solutions

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                    
                       
                       
                       
                         
                         

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