hello! looking for some help with this one thanks eBook Problem 17-02 Interest Rate Parity La...

Question

Question

hello! looking for some help with this one thanks

Answer 1

Answer #1

forward exchange rate = spot rate * [(1 + r_U.S.) / (1 + r_Japan)]

= $0.007 * [{1 + (0.07/2)} / {1 + (0.06/2)]

= $0.007 * [1.035 / 1.03]

= $0.007 * 1.00485 = $0.00703/Yen

Answer 2

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