The 30-day forward rate of the euro is (B) $1.30.
What is a spot rate?
- The spot rate is the price indicated for an interest rate, commodity, security, or currency for immediate settlement.
- The spot rate, often known as the "spot price," is the current market value of an asset that is available for immediate delivery at the time the quote is made.
- The spot rate is obtained by determining the discount rate that equals the present value (PV) of a zero-coupon bond.
- These are based on assumptions about future interest rates.
- As a result, spot rates can employ varying interest rates for various years before maturity.
To find the 30-day forward rate of the euro:
Given: The spot rate of the euro is quoted at $1.29.
So, $1.29 × [1+ 0.10/(360/30)] = $1.30
Therefore, the 30-day forward rate of the euro is (B) $1.30.
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