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Dollar-Yen Forward Premium/Discount Analysis

The document calculates the forward premium or discount between the US dollar and Japanese yen using two examples. It determines a 6.011% forward discount in the first example and a 1.549% forward premium in the second example.

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Divya Chopra
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9 views5 pages

Dollar-Yen Forward Premium/Discount Analysis

The document calculates the forward premium or discount between the US dollar and Japanese yen using two examples. It determines a 6.011% forward discount in the first example and a 1.549% forward premium in the second example.

Uploaded by

Divya Chopra
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

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1. 6-month forward dollar versus the Japanese yen= 115.84

2. Spot dollar versus the Japanese yen = 119.43

¥ ¥
𝐹𝑛 −𝑆
$ $
Premium/discount($ versus ¥)= ¥
𝑛𝑆
$
Continue

115.84−119.43
Premium/discount($ versus ¥)= *100
.5∗119.43

= - 6.011%

This is a forward discount on the dollar versus the yen of 6.011


percent per annum; the dollar costs 6.011 percent per annum less
for forward delivery than for spot delivery.
Continue

1. 6-month forward dollar versus the Japanese yen= 117.04

2. Spot dollar versus the Japanese yen = 116.14

¥ ¥
𝐹𝑛 −𝑆
$ $
Premium/discount($ versus ¥)= ¥
𝑛𝑆
$
Continue

117.04−116.14
Premium/discount($ versus ¥)= *100
.5∗116.14

= 1.549%

This is a forward premium on the dollar versus the yen of 1.549


percent per annum; the dollar costs 1.549 percent per annum more
for forward delivery than for spot delivery.

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