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# Spot and Forward Rates: Was the Swiss franc selling at a discount or premium in the forward market?

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The Wall street Journal reported the following spot and forward rates for Swiss Franc (\$/SF).

Spot \$0.8202
30-day forward \$0.8244
90-day forward \$0.8295
180-day forward \$0.8343

a. Was the Swiss franc selling at a discount or premium in the forward market?
b. What was the 30-day forward premium (or discount)?
c. What was the 90-day forward premium (or discount)?
d. Suppose you executed a 90-day forward contract to exchange 100,000 Swiss francs into U.S. dollars. How many dollars would you get 90 days hence?
e. Assume a Swiss bank entered into a 180-day forward contract with Bankers Trust to buy \$100,000. How many francs will the Swiss bank deliver in six months to get the U.S. dollars?

#### Solution Preview

The Wall street Journal reported the following spot and forward rates for Swiss Franc (\$/SF).

SpotÂ Â Â Â Â Â Â Â Â Â Â  Â Â Â  \$0.8202
30-day forwardÂ Â Â Â  \$0.8244
90-day forwardÂ Â Â Â  \$0.8295Â Â
180-day forwardÂ Â Â Â \$0.8343

a. Was the Swiss franc selling at a discount or premium in the forward market?

Swiss franc is selling at a premium because 1 Swiss franc costs \$0.8202 in the spot market \$0.8244 after 30 days, \$0.8295 ...

#### Solution Summary

This solution calculates the forward premium and discount on currencies as well as the amount of dollars and swiss francs exchanged.

\$2.49