- This topic has 3 replies, 2 voices, and was last updated 6 years ago by
John Moffat.
John Moffat.Viewing 4 posts - 1 through 4 (of 4 total)
-
Posts
-
mansoor
- Topics: 424
- Replies: 542
- ☆☆☆☆
the current spot rate for the dollar/euro is $/e 2.000 +- 0.003. the dollar is quoted at a 0.2c premium for forward rate
so the forward rate is 2.003 – .002 = 2.001
i cant not understand the answer explnation given in bpp kit.
why is the premium being deducted?
what does a premium mean?
thank u
John Moffat
- Topics: 57
- Replies: 50594
- ☆☆☆☆☆
You can not have watched the lectures because I go through lots of examples on this (and I cannot type out the entire lecture here!).
If the dollar is being quoted at a premium it means the dollar is going to strengthen and so there will be fewer dollars to the euro – so we subtract the premium.
(Similarly we add a discount)mansoor
- Topics: 424
- Replies: 542
- ☆☆☆☆
thank u
John Moffat
- Topics: 57
- Replies: 50594
- ☆☆☆☆☆
You are welcome 🙂
mansoor
John MoffatViewing 4 posts - 1 through 4 (of 4 total)
- You must be logged in to reply to this topic.