土豆妮

A foreign currency is at a forward premium if the forward rate:

A) expressed in domestic currency is above the spot rate.

B) expressed in domestic currency is below the spot rate.

C) expressed in domestic currency:foreign currency is above the spot rate.

---

A foreign currency is at a forward premium if the forward rate expressed in domestic currency is above the spot rate. A forward discount exists if the forward rate is below the spot rate.

土豆妮

The current spot rate quote is GBP:USD 2.00. A 180 day forward discount for the GBP of 2% (annualized) would reflect a forward price of:

A) USD:GBP 2.02.

B) GBP:USD 1.96.

C) GBP:USD 1.98.

---

The GBP is at a forward discount if the forward rate expressed in GBP:USD is below the spot rate. Since the annualized discount is 2%, the 180 day forward discount is 1% of spot, or USD 0.02.

[(1.98 ? 2.00) / 2.00](360 / 180) = -2%

土豆妮

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

A) discount of $0.051.

B) discount of 0.956%.

C) premium of $0.051.

---

Since the forward rate 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.