Foreign Exchange Markets
Forward Premiums and Forward Discounts
Example - The yen spot price is 112.645 yen per dollar and the
6 month forward rate is 111.300 yen per dollar, what is the
premium and discount relationship?
Answer - The dollar is selling at a 4.8% premium, relative to the
yen. The yen is selling at a 4.8% discount, relative to the
dollar.