Question: Forward Premium on the Dollar. Calculate the forward premium on the dollar if the spot rate is $1.5927=1.00 and the 6-month forward rate is $1.5456=1.00.

Forward Premium on the Dollar. Calculate the forward premium on the dollar if the spot rate is

$1.5927=£1.00

and the

6-month

forward rate is

$1.5456=£1.00.

Note: Use a 360-day year.

Part 1

The forward premium on the dollar is % (round to 4 decimal places)

The premium indicates that the pound is selling forward at a ??? to the dollar, and simultaneously, the dollar is selling forward at a ??? to the pound. That is, the forward rate requires fewer U.S. dollars in exchange for pounds than the current spot rate.

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