Question

"The one-year forward rate of the British pound is $1.55, while the current spot rate is $1.60. Based on the forward rate, what is the expected percentage change in the British pound over the next year

Answer 1

-3.125%

Step-by-step explanation:

The percentage change in the British pound is determined as the difference between the one-year forward rate ($1.55) and the current spot rate ($1.60), divided by the current spot rate, and then multiplied by 100%:

`P = (\$1.55-\$1.60)/(\$1.60)*100\%\\ P=-3.125\%`

Over the next year, the British pound will change by -3.125%.