The 3 Month Forward Rate Between British Pound and the Swiss

question 24

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.

• 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.

---

Definitions:

Output

The quantity of goods or services produced in a given time period.

Total Fixed Costs

The sum of all costs required to produce any level of output that do not change with the quantity produced, such as rent or salaries.

Workers

Individuals engaged in physical or mental activities aimed at producing goods or providing services in exchange for wages.

AVC

Stands for Average Variable Cost, which is the per-unit cost of production excluding fixed costs, changing with the level of output.