Explanation

To calculate the forward rate from forward points, we need to understand how forward points work:

1. Forward points represent the adjustment to the spot rate to get the forward rate.
2. Forward points are typically quoted in basis points (1 basis point = 0.0001).
3. The formula is: Forward Rate = Spot Rate + (Forward Points × 0.0001)

Given data:

• Spot rate (USD/EUR) = 1.0351
• Forward points = -1.1

Calculation: Forward Rate = 1.0351 + (-1.1 × 0.0001) Forward Rate = 1.0351 - 0.00011 Forward Rate = 1.03499

Why this is correct:

• Forward points of -1.1 means 1.1 basis points negative adjustment
• 1.1 basis points = 1.1 × 0.0001 = 0.00011
• Subtracting 0.00011 from 1.0351 gives 1.03499

Why other options are incorrect:

• Option A (1.02410): This would require subtracting 0.011, which is 110 basis points, not 1.1 basis points.
• Option B (1.03400): This would require subtracting 0.0011, which is 11 basis points, not 1.1 basis points.

Key concept: When forward points are negative, the forward rate is lower than the spot rate, indicating that the base currency (EUR) is trading at a forward discount relative to the quote currency (USD).