The current five‑year Euro yen and Eurodollar rates are 8% and 12.5% per year, respectively. What is the implied forward premium or discount of the yen (over the current spot rate for a five‑year forward contract) 17% premium 46% discount 74% discount 64% premium

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A: The world market where currencies are traded is known as the foreign exchange market, or forex or…

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Q: The one year forward premium for euro against the dollar is 4%. If the interest rate in the euro…

A: Forward Premium = 4% = 0.04Interest Rate in the Foreign Currency = 4.5% = 0.045

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A: Forward rate: It is the rate or price at which a contract is settled at a future date.

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Q: What is the discount margin? +30.94 bps -309.4 bps -30.94 bps +309.4 bps

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Exchange Rate Risk

It is the possibility that the value of a currency will fluctuate in the future. In the wake of globalization, business establishments have increasingly ventured into international markets. The volume of international trade has prospered excellently in the near past and is expected to be more affluent in the future. The use of exchange-traded derivative financial instruments has been multi-folded to provide for the requirements of various MNCs and offshore potential investors. Most banks and financial institutions have helped integrate the global economies. Our Government has introduced some bold and extreme measures to fulfil the purpose behind the fiscal, industrial, and monetary policies. The enactment of GST is a huge step towards streamlining the taxation system of the country. Owing to Covid-19, this aspect of corporate risk management has become critical.