Using the information in the table below, will the USD be trading at a premium or a discount to the spot, in the forward market USD/ZAR 6-month USD LIBOR (180 days) 6-month ZAR JIBAR (180 days) 14.2385 1.25% 8.50% At a discount because the interest rate differential has to be offset by USD depreciation. At a premium because the interest rate differential has to be offset by USD appreciation. At the same rate as in the spot market. At a premium because the interest rate differential has to be offset by ZAR appreciation.
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In the forward market, a currency is said to be trading at a premium if the forward exchange rate is higher than the spot exchange rate. Conversely, a currency is said to be trading at a discount if the forward exchange rate is lower than the spot exchange Show more…
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