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forward exchange rates

pcunniffpcunniff MilwaukeePosts: 18 Associate

Where in Kaplan do you multiply the two rates together? I thought you take the 90 day forward and divide by 4? Otherwise I didnt know if you take the spot and multiply by 1-.0025?


The spot CHF/EUR exchange rate is 1.2025. If the 90-day forward quotation is +0.25%, the 90-day forward rate is closest to:


A)

1.2055.


B)

1.2000.


C)

1.2050.


Explanation

The 90-day forward CHF/EUR exchange rate is 1.2025 × 1.0025 = 1.20551. The EUR is at a forward premium to the CHF.

(Study Session 5, Module 18.2, LOS 18.e)

Related Material

SchweserNotes - Book 2

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