Question

one-year forward rate of the British pound is quoted at $1.60, and the spot rate of the British pound is quoted at $1.63. Is the forward

Answer 1

the forward discount is 1.84%

Step-by-step explanation:

The computation is shown below:

As we can see that the spot rate is more than the forward rate so it is a forward discount

So the forward discount is

= (Spot rate - forward rate) ÷ (spot rate)

= ($1.63 - $1.60) ÷ $1.63

= 1.84%

Hence, the forward discount is 1.84%