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PRMIA Exam 8006 Topic 8 Question 63 Discussion

Actual exam question for PRMIA's Exam I: Finance Theory, Financial Instruments, Financial Markets ? 2015 Edition exam
Question #: 63
Topic #: 8
[All Exam I: Finance Theory, Financial Instruments, Financial Markets ? 2015 Edition Questions]

If the CHF/USD spot rate is 1.1010 and the one year forward is 1.1040, what is the annualized forward premium or discount, and the one year swap rate?

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Suggested Answer: C

If the spot rate is 1.1010 and the forward is 1.1040, the swap rate is 30 'points' (= 1.1040 - 1.1010). The annualized swap premium is the swap premium divided by the spot rate, and therefore =0.0030/1.1010 =0.27%, or 27 basis points.


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