Question

Suppose that the dollar-mark 6 months forward rate is $1.275/Mark. Suppose that the dollar-mark forward premium is 5%. Calculate the spot rate, $1=Mark_______ work to 4 decimal places.

Answer 1

$1 = 0.8039 Mark

Step-by-step explanation:

Forward Rate = Spot rate * (1 +rate*180/360)

1.275 = Spot rate * (1 + 0.05*180/360)

Spot rate = $1.2439/Mark

Now we are asked rate per dollar

$1 = (1/1.2439)Mark

$1 = 0.8039 Mark