1) The following quotations are given for the spot rate and the 1-month, 3-moth ad 6-month absolute swap rates involving the US$ and the Euro ():

Spot rate

1.0904 Bid ($/)

1.0910 Ask ($/)

1-month absolute swap

0.0219 Bid ($/)

0.0224 Ask ($/)

3-month absolute swap

0.0463 Bid ($/)

0.0472 Ask ($/)

6-motnh absolute swap

0.0578 Bid ($/)

0.0587 Ask ($/)

Calculate forward quotes for the US $ dollar as:

a) outright forward quotes,

b) annual percentage premium or discount.

Explain whether or not the forward rates can be reliable forecasts of future spot rates.