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

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

Please see the attached file
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?

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.

$2.19