Question: You are contemplating a forward contract to hedge the expected receivable in Jordanian dinar JOD in 90 days. Your bank quotes a three-month forward rate

You are contemplating a forward contract to hedge the expected receivable in Jordanian dinar JOD in 90 days. Your bank quotes a three-month forward rate of USD1.6435. Before Jim decides to sell pounds one month forward, he wants to be sure that the forward rate is reasonable, given the prevailing spot rate. A three-month yield in the US (not annualized) is 1 percent, while a three- month rate in Jordan is 1.4%. Do you think forward rate is reasonable if the quoted spot on the dinar is USD1.6500?

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