Explanation:
Forward points are usually quoted in pips. Since the forward bid points (25.9) are less than the ask points (35.8), this indicates that the forward currency is trading at a premium. When quoting a forward rate at a premium, the points must be added to the spot rates.
Given:
6-month forward bid exchange rate = 1.6432 + 0.00259 = 1.64579.
For completeness:
Therefore, the statement "Given that the spot bid rate is 1.6432, then the 6-month bid exchange rate is 1.64579" is correct.
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Q.14 The 6-month forward foreign exchange is stated as bid 25.9 and ask 35.8. Given that the spot bid rate is 1.6432 and the spot ask rate is 1.7432, which of the following statements is true?
A
Given that the spot bid rate is 1.6432, then the 6-month bid exchange rate is 1.6445.
B
Given that the spot bid rate is 1.6432 and the spot ask rate is 1.7432, then the 6-month bid-ask spread in the exchange rate is 0.64479.
C
Given that the spot bid rate is 1.6432, then the 6-month bid exchange rate is 1.64579.
D
Given that the spot ask rate is 1.7432, then the 6-month exchange rate is 1.7555.