The spot exchange rate is S(¥120/$1). The U.S. interest rate is 4 percent APR. The Japanese...
The spot exchange rate is S(¥120/$1). The U.S. interest rate is 4 percent APR. The Japanese interest rate is 2 percent APR. What is the no-arbitrage 90-day forward rate?
Multiple Choice
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¥119.4059/$1
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¥122.3529/$1
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¥120.5970/$1
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None of the options
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¥117.6923/$1
Homework Answers
(1+ix) = F(x/y) / S(x/y) * (1+iY)
1.02 = F(x/y) / 120 * 1.04
F(x/y) = (1.02*120) / 1.04
F(x/y) = 117.6923
Option 5 is correct
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