You are given the following spot and forward bid-ask rates for the Australian dollar (US$/A$) exchange rate: Can you tell for which maturities the Australian dollar is at premium (and the US dollar is at discount) and for which maturities the Australian dollar is at discount (hence the US dollar is at premium) without calculating the forward rates? Use 5 decimal points in your calculations.

Period US$/A$ Bid Rate US$/A$ Ask Rate spot 0.91630 0.91700 1 month 0.91477 0.91551 2 months 0.91313 0.91388 3 months 0.91156 0.91233 6 months 0.90542 0.90621 12 months 0.89155 0.89242 24 months 0.86488 0.86602

1.4) Using the mid-rates and using the information in the table from question calculate the forward premium or discount for the Australian dollar at 3 months.

Answer rating: 100% (QA)

Step 1 The bid rate is the rate at which a market participant is willing to buy a currency while the ... View the full answer