Suppose it is January 1, 1998 and spot pounds are selling at $1.7342, while 90 day forward pounds are selling at $1.7156. At the same time, DM spot and 90 day forward rates are $0.6138 and $0.6014, respectively. According to these quotes the

a) pound is selling at a 3.87% forward discount relative to the DM

b) pound is selling at a 2.37% forward premium relative to the DM

c) DM is selling at a 0.97% forward discount relative to the pound

d) DM is selling at a 1.54% forward premium relative to the pound

The answer is a, could you explain the process to me?

Answer rating: 100% (QA)

Pound spot rate 17342 Pound 90 days forward rate 17156 DM spot rate 06138 DM days forward rate ... View the full answer