On Monday the 1" of November 2004 the dollar/euro exchange rate was 1.2748 and the dollar/euro 12 months forward exchange rate was 1.2717. a. Calculate the annual forward premium of the euro and the dollar. b. Explain whether the forward premium indicates that investors expect the curo to appreciate or depreciate in the future. c. If you expect that the euro will appreciate in the future, should you buy or sell a forward euro contract?
