The forward rate on a 90-day contract is FC/USD 5 and the spot is FC/USD 4. The USD is trading at a forward: A. premium of 1.0. B. discount of 1.0. C. premium of 0.8.
Base currency (USD in this case) is at a forward premium if the forward rate is above the spot rate. Forward premium = forward rate – spot rate = 5 − 4 = 1. (LOS 14.C, LOS type)
