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?

AAn annualized forward discount of 30 basis points and a swap rate of 27 points

BAn annualized forward premium of 30 basis points and a swap rate of 27 points

CAn annualized forward premium of 27 basis points and a swap rate of 30 points

DAn annualized forward discount of 27 basis points and a swap rate of 30 points

Show Suggested Answer

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.

by Audry at Dec 26, 2022, 03:46 PM

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