Explore BrainMass

Explore BrainMass

    Calculating the forward rate between two currencies

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The Current Exchange Rate between Japan and U.K. is One British Pound Equals 150 Japanese Yen. The one year Annual Interest Rate in Japan is 1%, while the Annual Interest Rate in U.K. is 4%.

    Given this, what would you expect the Forward Rate to be between Japanese Yen and British Pounds, one year from now?

    © BrainMass Inc. brainmass.com June 4, 2020, 3:03 am ad1c9bdddf

    Solution Preview

    Spot rate of one British Pound=150 Japanese Yen
    Annual Interest rate in Japan=1%
    Annual Interest rate in UK=4%

    Forward Rate = Spot Rate*(1 + Interest Rate of Japan)/(1 + Interest Rate of UK)

    Solution Summary

    Solution describes the steps to calculate the forward rate between the two given currencies, one year from now.