Question

The spot bid rate for the Libyan Dinar is $0.7123/LYD, the spot ask rate is $0.7163/LYD and the average spot rate is $0.7143/LYD.

A.) Using the average spot rate, calculate the forward rate if there was a forward premium of 0.40%.

B.) Using the average spot rate, calculate the forward rate if there was a forward discount of 1.30%.

C.) Using the average spot rate, and assuming the forward rate is $0.7042/LYD, calculate the forward premium or (discount).

D.) Using the bid and ask spot rates, and assuming the forward points are 35/33, calculate the forward bid and ask rates.

E.) Using the bid and ask spot rates, and assuming the forward points are 45/53, calculate the forward bid and ask rates.

Answer 1

A)	Average spotrate (1LYD)			=	$0.7143
	Forward premium			=	0.4%*$0.7143
				=	$          0.0029
	Forward rate (1 LYD)			=	Spotrate + forward premium
				=	$0.7143+$0.0029
				=	$          0.7172
B)	Average spotrate (1LYD)			=	$0.7143
	Forward discount			=	01.3%*$0.7143
				=	$                                0.0093
	Forward rate (1 LYD)			=	Spotrate - forward discount
				=	$0.7143-$0.0093
				=	0.7050
C)	Average spotrate (1LYD)			=	$0.7143
	Forwardrate (1 LYD)			=	$0.7042
	Forward premium/(discount)			=	(Forward rate-spot rate)/spot rate
				=	(0.7042-$0.7143)/$0.7143
				=	-0.0101/0.7143
				=	-0.0141	i.e 1.41 % discount
D)	Bid rate(1LYD)			=	$0.7123
	Ask rate(1LYD)			=	$0.7163
	Forward rate(when bid point is high&ask point is low)			=	Spot rate - forward points
	Forward bid rate(1LYD)			=	$0.7123-$0.0035
				=	$          0.7088
	Forward ask rate(1LYD)			=	$0.7163-$0.0033
				=	$          0.7130
E)	Bid rate(1LYD)			=	$0.7123
	Ask rate(1LYD)			=	$0.7163
	Forward rate	(when bidpoint is low& ask point is higher)		=	Spot rate + forward points
	Forward bid rate(1LYD)			=	$0.7123+$0.0045
				=	$                                0.7168
	Forward ask rate(1LYD)			=	$0.7163+$0.0053
				=	$                                0.7216
	If you have any doubt,please ask
	Please upvote the answer