Math Problem Statement
he Wall Street Journal reported the following spot and forward rates for the Swiss franc ($/SF).
Spot $ 0.8206 30day forward $ 0.8512 90day forward $ 0.8544 180day forward $ 0.8591
a. Was the Swiss franc selling at a discount or premium in the forward market?
multiple choice Discount Premium
b. What was the 30day 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 90day forward premium (or discount) percentage? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
d. Suppose you executed a 90day forward contract to exchange 140,000 Swiss francs into U.S. dollars. How many dollars would you get 90 days hence?
e. Assume a Swiss bank entered into a 180day forward contract with Bankers Trust to buy $140,000. How many francs will the Swiss bank deliver in six months to get the U.S. dollars? (Round your answer to 2 decimal places.)
Solution
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Math Problem Analysis
Mathematical Concepts
Foreign Exchange
Forward Premium/Discount Calculation
Formulas
Forward Premium or Discount (%) = [(Forward Rate  Spot Rate) / Spot Rate] × (360 / Number of Days) × 100
Currency Conversion: Amount = Rate × Units
Theorems

Suitable Grade Level
Undergraduate/Finance
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