11． spot and 30-day forward exchange rates for the Swiss franc (CHF) are 0.59984 CHF/USD and 0.62734 CHF/USD, respectively. Relative to the USD, the CHF is selling at a forward:

A)   differential of 275 points.

B)   annualized discount of 4.38%.

C)   discount of $0.073.

D)   premium of $0.073.

12．the 90-day forward rate for the CAD is USD 0.6503, and the spot rate is USD 0.6403, then the annualized premium is:

A)   6.25%.

B)   1.00%.

C)   1.56%.

D)   2.60%.

13． spot and 30-day forward rates for the Euro are $1.1525 and $1.1015, respectively. The Euro is selling at a forward:

A)   premium of $0.051.

B)   discount of $0.051.

C)   differential of 51 points.

D)   discount of 0.956%.

11． spot and 30-day forward exchange rates for the Swiss franc (CHF) are 0.59984 CHF/USD and 0.62734 CHF/USD, respectively. Relative to the USD, the CHF is selling at a forward:

A)   differential of 275 points.

B)   annualized discount of 4.38%.

C)   discount of $0.073.

D)   premium of $0.073.

The correct answer was C)

Forward Discount = Forward rate – Spot Rate = (1/0.62734) - (1/0.59984) = -$0.073

Since the forward rate is less than the spot rate, the Swiss franc is selling at a forward discount. Note that although in percentage terms, $0.073/1.667 = -4.38%, when the forward discount is expressed in percentage terms, it is done so on an annualized basis. The correct forward premium expressed as a percentage would be equal to 0.0438 * (360/30) = 52.60%.

12．the 90-day forward rate for the CAD is USD 0.6503, and the spot rate is USD 0.6403, then the annualized premium is:

A)   6.25%.

B)   1.00%.

C)   1.56%.

D)   2.60%.

The correct answer was A)

annualized premium = [(0.6503 - 0.6403)/0.6403]*(360/90) = 0.625 or 6.25%.

13． spot and 30-day forward rates for the Euro are $1.1525 and $1.1015, respectively. The Euro is selling at a forward:

A)   premium of $0.051.

B)   discount of $0.051.

C)   differential of 51 points.

D)   discount of 0.956%.

The correct answer was B)     

Since the forward date is less than the spot rate, the Euro is selling at a forward discount. The amount of the discount is calculated as follows:

Forward Discount = Forward rate – Spot Rate = $1.1015 - $1.1525 = -$0.051.