Skip to content

FRM Part I · FRM Exam Part I · Foreign Exchange Markets

The USD/CHF spot rate is 0.9000 CHF per USD. The 6-month forward points are quoted as -60 (one point = 0.0001). Which statement is correct?

The outright forward is 0.8940 CHF per USD, found by subtracting 60 points from spot. Because the forward is below spot, the USD is at a forward discount, which fits Swiss interest rates being lower than US rates.

  1. AThe 6-month outright forward rate is 0.8940 and the USD trades at a forward discountCorrect
  2. BThe 6-month outright forward rate is 0.9060 and the USD trades at a forward premium
  3. CThe 6-month outright forward rate is 0.8940 and the USD trades at a forward premium
  4. DThe 6-month outright forward rate is 0.9060 and the USD trades at a forward discount

Explanation

Outright forward = 0.9000 - 0.0060 = 0.8940. The forward is below spot, so the base currency (USD) trades at a discount. This is consistent with CHF interest rates being lower than USD rates.

Did you get it right without looking?

One question tells you little. A timed set on Foreign Exchange Markets shows your real accuracy, how long you take and where you lose marks.

Practise Foreign Exchange MarketsFree diagnostic mock

More Foreign Exchange Markets questions