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Q.3824 The interest rate on the Nigerian Naira (NGN) is 2%, and that of the South African rand (ZAR) is 7%. Given that the spot rate NGN/ZAR is 1.3500, what is the 6-month forward exchange rate quoted as points? | Financial Risk Manager Part 1 Quiz - LeetQuiz

Explanation:

The correct answer is B.

For an exchange rate XXXYYY, we have,

$F = S \frac{(1 + R_{YYY})^T}{(1 + R_{XXX})^T}$ $= S \frac{(1 + R_{ZAR})^T}{(1 + R_{NGN})^T}$ $= 1.3500 \frac{(1.07)^{\frac{1}{2}}}{(1.02)^{\frac{1}{2}}}$ $= 1.38269$

So, the points are given by:

$`$ 10000`(1.38269 - 1.3500) = 326.92 \approx 327$$

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