In: Finance
How do you find the spot rate and forward rate of the Japanese Yen? I need the value (with unit if applicable) and the term (Q3,Q4, 2-month, 4-week, ect)
Use today's date and December 2020.
Spot Rate and Forward Rate:-
The precise meanng of the terms " forward rate" and "spot rate" are somewhat diferent in different marekets. But what they have in common is that they refer, for example, to the curent price or bond yield the spot rate versus the price or yield for the same product or instrument at some point in the futrure the forward rate.
In commodities future markets, a spot rate is the price for a commodity being traded immediately, or "on the spot". A forward rate is the settlement price of a transaction that will not take place until a predetermined date it is forward looking.
A spot rate or sot price, repressents a contracted price for the purchase or sale os a commodity, security, or currency for immediate delivery and payment on the spot date which is normally one or two business days aftr the trade date. The spot rate is the current price quoted for immediate settlement of the contract. For example, if during the month of august a wholesale comapany wans immediate delivery of orange juice, it will pay the spot price to the seller and have orange juice delivered withhin tow days.
Formula of calculate the forward or spot rate
Forward Rate = Spot Rate*1
where:-IRO= interest rate of overeseas cost
IRD= interesst rate of domestic cost
we can find spot rate or forward rate by this help also:-
Spot exchange rate:- -----------
Intrest Rate in Base currency (%):--------------
Interest Rate in Price currency (%)--------------
Spot date:------------
forward date:----------
forward period:-------
Calculate-----------
To calculate the forward Rate and Spot rates for the Yen in the relationship of dollars per yen.
Y(yen)/ $ forward exchange Rate is ( 1/109.50=0.0091324). Y/$ spot rate is (1/109.38=0.0091424)
The basic of calllculating a forward rate require both the current spot price of the currency pair and the interest rates in the two countries. Consider this example of an exchange between the japanese uen and the US dollar.
for the calculation of periods other than a year, you would input the number of days as shown in the following example. A three month forward rate is equal to the spot rate multiplied by
(1+the domestic rate times *90/360/1 + foreign rate time *90/360)
to calculate the forward rate,multiply the spot rate by the ratio of interst rates and adjust for the time until expiration. So, the eforward rate is equal to the spot rate x (1 + foreign interest rate)/ 1+ domestic interest rate).