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Up7
Where in Kaplan do you multiply the two rates together? I thought you take the 90 day forward and divide by 4? Otherwise I didnt know if you take the spot and multiply by 1-.0025?
The spot CHF/EUR exchange rate is 1.2025. If the 90-day forward quotation is +0.25%, the 90-day forward rate is closest to:
A)
1.2055.
B)
1.2000.
C)
1.2050.
Explanation
The 90-day forward CHF/EUR exchange rate is 1.2025 × 1.0025 = 1.20551. The EUR is at a forward premium to the CHF.
(Study Session 5, Module 18.2, LOS 18.e)
Related Material
SchweserNotes – Book 2
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Up3
Aren’t forward rates usually quoted in pips, i.e. added or subtracted? Since it’s denoted +0.25% multiplying by 1.0025 makes sense.
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