Question: We discussed the fact that forward rates usually deviate from spot rates. Forward rates can be greater than or less than spot. Suppose you have

We discussed the fact that forward rates usually deviate from spot rates. Forward rates can be greater than or less than spot. Suppose you have the following quotes:

Spot Yen-Dollar rate: JPY 118.27/USD

3 month forward Yen-Dollar rate: JPY 116.84/USD

If we use the JPY as the home currency, use the following formula to compute the 90 day percentage forward premium or discount on the JPY:

If JPY = (spot-forward)/forward x (360/number of days in forward period)

Based on the quotes, did the yen appreciate forward or depreciate forward? Explain.

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