in calculating forward rate for month way we divided by 9 month
also from were we got 179.745 ( 270/179.745 the balance 270 what does 179.745 mean and from where we got this rate
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POLYTOT PLC JUN2004
10y ago#1We need a 4 month forward rate, but we are only given rates for 3 months and 12 months.
So the estimate of the 4 month rate is the 3 months rate plus 1/9 of the difference between the 3 month and 12 month rates.
The official spot rate is 156.30 peso to the pound. However the question says that the actual unofficial rate will be 15% worse. So the rate they will be using is 156.30 plus 15% = 179.745 peso to the pound.
thanks
10y ago#3You are very welcome :-)
Dear John,
In this question, when calculating the premium for the option, why did they use spot rate of 1.5475 and not 1.5510.
10y ago#5The premium is payable in $'s, so they need to buy dollars. Therefore the relevant rate is 1.5475 when converting to pounds.
How to know the premium is payable in dollar John? Thanks for ur kind explanation ?
10y ago#7Because above the table is is written "cents per pound" :-)
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