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标题: Currency Forward Premium or Discount Calculation? [打印本页]

作者: RoastBeef 时间: 2011-7-11 19:32 标题: Currency Forward Premium or Discount Calculation?

Forward Rate: $1.60/1 pound
Spot: $1.75/1 pound

The exact forward premium/discount for the pound against the $ is 1.6-1.75/1.75 = -8.57% or a forward discount of -8.57% of the pound against the dollar.

Why is it then, that when you convert the rates to pound/$, the discount changes??

1/1.6 = .625 pound/1$ Forward Rate
1/1.75 = .57143 pound/1$ Spot Rate

Forward premium/discount calculation = .625 - .57143 / .57143 = - 9.374% discount

What causes the difference between these answers?

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