The 3 Month Forward Rate Between British Pound and the Swiss

question 30

Multiple Choice

The 3 month forward rate between British pound and the Swiss franc is £0.5/SF.The current spot rate is £0.51/SF.Assuming 360 days in a year,what is the correct statement from the below?

• A) The Swiss franc is trading at a 1.96% premium to the British pound for delivery in 90 days.
• B) The Swiss franc is trading at a 7.84% premium to the British pound for delivery in 90 days.
• C) The Swiss franc is trading at a 1.96% discount to the British pound for delivery in 90 days.
• D) The Swiss franc is trading at a 7.84% discount to the British pound for delivery in 90 days.

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Definitions:

Alfred Marshall

A prominent British economist known for his work in microeconomics and for developing the concept of price elasticity of demand.

Economist

A professional in the social science discipline of economics, specializing in the analysis and interpretation of economic phenomena.

Demand and Supply

Fundamental economic concepts representing the quantity of a good or service consumers are willing and able to purchase and the quantity offered by sellers.

Inferior Good

An inferior good is a type of good whose demand decreases when consumer income rises, unlike normal goods, for which the opposite is observed.