The spot and 30-day forward rates for the Swiss franc are $0.9075 and $0.9120 respectively. The...

The spot and 30-day forward rates for the Swiss franc are $0.9075 and $0.9120

respectively. The Swiss franc is said to be selling at an annualized forward

Solutions

Expert Solution

Solution :

The formula for calculating the annualized forward premium or forward discount for a given quote is

= [ ( Forward Rate – Spot rate ) / Spot Rate ] * 100 * ( 365 days / Period of quote )

As per the information given in the question we have

Spot rate of the Swiss Franc = $ 0.9075 ; 30 day Forward rate of the Swiss Franc = $ 0.9120

Period of the quote = 30 days ;

Applying the above information in the formula we have

= [ ( 0.9120 - 0.9075 ) / 0.9075 ] * 100 * ( 365 / 30 )

= [ 0.0045 / 0.9075 ] * 100 * 12.166667

= 0.004934 * 100 * 12.166667

= 6.003289 %

= 6.0033 %

Since the solution is positive the 30 day forward rate is at a premium of = 6.0033 %

Thus the Swiss franc is said to be selling at an annualized forward premium of 6.0033 %

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

The Wall Street Journal reported the following spot and forward rates for the Swiss franc ($/SF)....

The Wall Street Journal reported the following spot and forward rates for the Swiss franc ($/SF). Spot $ 0.8227 30-day forward $ 0.8554 90-day forward $ 0.8565 180-day forward $ 0.8612 a. Was the Swiss franc selling at a discount or premium in the forward market? Discount Premium b. What was the 30-day forward premium (or discount) percentage? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) c. What was the 90-day forward...

The spot rate for the Swiss Franc is $1.05/CHF. A dealer quotes $1.0475/CHF for the 90-day...

The spot rate for the Swiss Franc is $1.05/CHF. A dealer quotes $1.0475/CHF for the 90-day forward rate. If the interest rate in the US is 4% and the interest rate in Swizerland is 8%, can you arbitrage? Show the details. Use 100,000 as the notional amount. a. At what forward rate will it not be possible to arbitrage? c. Continuing with the previous question, If the inflation rate in the US was 7% and 2% in Croatia, what is...

You have the following market data. Spot price for the Swiss Franc is $1.198 per Franc....

You have the following market data. Spot price for the Swiss Franc is $1.198 per Franc. Two-month forward price is $1.247 per Franc. U.S. dollar LIBOR for two months is a continously compounded rate of 2.92% per annum. Swiss LIBOR for two months is a continuously compounded rate of 2.32% per annum. Underlying asset for this contract (i.e., the quantity of Swiss Francs to be delivered in two months) is 500,000 Swiss Francs. What is the total net profit if...

Suppose the spot and three-month forward rates for the yen are ¥79.60 and ¥78.96, respectively. ...

Suppose the spot and three-month forward rates for the yen are ¥79.60 and ¥78.96, respectively. What would you estimate is the difference between the annual inflation rates of the United States and Japan? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Difference in rates % *I tried getting assistance with this question before but the answer was...

In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc).

In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc). Interest rates in the United States and Switzerland were 0.25% and 0% per annum, respectively, with continuous compounding. The 3-month forward exchange rate was 1.0300 ($ per franc). What arbitrage strategy was possible? How does your answer change if the forward exchange rate is 1.0500 ($ per franc).

A bank is quoting the following exchange rates against thedollar for the Swiss franc and...

A bank is quoting the following exchange rates against the dollar for the Swiss franc and the Australian dollar (i.e., in European terms): SFr/$ = 1.5150-60 and A$/$ = 1.6345-55. An Australian firm asks the bank for a SFr/A$ quote in Swiss terms. What cross-rate would the bank quote?

Q6) In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was...

Q6) In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc). Interest rates in the U.S. and Switzerland were 0.25% and 0% per annum, respectively, with continuous compounding. The three-month forward exchange rate was 1.0300 ($ per franc). What arbitrage strategy was possible?

In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404...

In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc). Interest rates in the U.S. and Switzerland were 0.25% and 0% per annum, respectively, with continuous compounding. The three-month forward exchange rate was1.0300 ($ per franc). What arbitrage strategy was possible? How does your answer change if the exchange rate is 1.0500 ($ per franc).

The spot rate for the Singapore dollar is £0.320 and the 30-day forward rate is £0.325....

The spot rate for the Singapore dollar is £0.320 and the 30-day forward rate is £0.325. At what discount or premium is Singapore dollar selling?

1a A Global Forex trader gives the following quotes for the Swiss Franc spot, one month,...

1a A Global Forex trader gives the following quotes for the Swiss Franc spot, one month, three months and six months to US based treasurer USD 1.0356/60 4/6 9/8 14/11 Calculate outright price for Spot, One – Month, Three- Month, Six Months b If the trader wished to buy 10,000 Swiss francs for one and three months forward, how much would he pay in dollars? c If he wished to purchase 20,000 US dollars three-Month Forward Contract and Six-Month...

Subjects