What is the formula to calculate forward premium or discount?
Understanding Forward Premium and Discount

Quiz
•
Other
•
Professional Development
•
Easy
ANKIT WALIA
Used 3+ times
FREE Resource
15 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
2 mins • 1 pt
Forward premium or discount = (Spot rate - Forward rate) / Spot rate * 100
Forward premium or discount = (Forward rate - Spot rate) * Spot rate / 100
Forward premium or discount = (Forward rate - Spot rate) / Spot rate * 100
Forward premium or discount = (Forward rate + Spot rate) / Spot rate * 100
2.
MULTIPLE CHOICE QUESTION
2 mins • 1 pt
Explain the concept of forward premium and forward discount with examples.
Forward premium and forward discount are determined by the interest rate differentials between two currencies. For example, if the interest rate in the US is higher than in Japan, the forward exchange rate of USD/JPY will reflect a forward premium for USD and a forward discount for JPY.
Forward premium and forward discount are determined by the stock market performance of the countries involved.
Forward premium and forward discount are determined by the weather conditions in the countries involved.
Forward premium and forward discount are determined by the population size of the countries involved.
3.
MULTIPLE CHOICE QUESTION
2 mins • 1 pt
What are the factors that affect forward premium and discount?
Government regulations
Consumer spending habits
Weather patterns
Factors that affect forward premium and discount include interest rate differentials, inflation differentials, and market expectations about future exchange rates.
4.
MULTIPLE CHOICE QUESTION
2 mins • 1 pt
How do changes in interest rates affect forward premium and discount?
Higher interest rates have no impact on forward premium
Higher interest rates can lead to a lower forward premium
Higher interest rates can lead to a higher forward premium, while lower interest rates can lead to a forward discount.
Lower interest rates can lead to a higher forward premium
5.
MULTIPLE CHOICE QUESTION
2 mins • 1 pt
Calculate the forward premium or discount when the spot exchange rate is 1.5 and the 3-month forward rate is 1.55.
The forward premium or discount is 2.5%
The forward premium or discount is 3.33% (calculated as (1.55 - 1.5) / 1.5 * 100)
The forward premium or discount is 0.05%
The forward premium or discount is 10%
6.
MULTIPLE CHOICE QUESTION
2 mins • 1 pt
Discuss the relationship between interest rate differentials and forward premium or discount.
Forward premium is created when interest rates are the same for both currencies
Interest rate differentials have no impact on forward premium or discount
Forward discount is created when interest rates are the same for both currencies
Interest rate differentials affect the forward premium or discount. When the interest rate of one currency is higher than another, it creates a forward premium for the higher interest rate currency and a forward discount for the lower interest rate currency.
7.
MULTIPLE CHOICE QUESTION
2 mins • 1 pt
What is the significance of forward premium and discount in international trade?
Forward premium and discount only impact domestic transactions
Forward premium and discount are significant in international trade as they reflect the expected future exchange rate movements, which can impact the cost and profitability of international transactions.
Forward premium and discount have no significance in international trade
Forward premium and discount are only relevant for short-term trade
Create a free account and access millions of resources
Similar Resources on Wayground
10 questions
Day 1 - General Knowledge on Essential Oils

Quiz
•
Professional Development
20 questions
Quantitative Aptitude and Insights for Placements

Quiz
•
Professional Development
15 questions
Turnkey Products and Services

Quiz
•
Professional Development
18 questions
3-WORKING CAPITAL&ASSETS MANAGEMENT

Quiz
•
Professional Development
10 questions
Ch. 6: Fl. Statutes, Rules and Regulations Pertinent to Life

Quiz
•
Professional Development
10 questions
Understanding Dividends Quiz

Quiz
•
Professional Development
10 questions
AS Q1ROSA Summit (Business Acumen)

Quiz
•
Professional Development
15 questions
Product Quiz - SPA-GPP

Quiz
•
Professional Development
Popular Resources on Wayground
25 questions
Equations of Circles

Quiz
•
10th - 11th Grade
30 questions
Week 5 Memory Builder 1 (Multiplication and Division Facts)

Quiz
•
9th Grade
33 questions
Unit 3 Summative - Summer School: Immune System

Quiz
•
10th Grade
10 questions
Writing and Identifying Ratios Practice

Quiz
•
5th - 6th Grade
36 questions
Prime and Composite Numbers

Quiz
•
5th Grade
14 questions
Exterior and Interior angles of Polygons

Quiz
•
8th Grade
37 questions
Camp Re-cap Week 1 (no regression)

Quiz
•
9th - 12th Grade
46 questions
Biology Semester 1 Review

Quiz
•
10th Grade