Question

Question 2 0/1 pts If the interest rate on short term US government debt is 1.1, the comporarable rate for Japanese government debt is 1, and you can buy 111 yen with a dollar, how many yen will you be able to buy with a dollar 1 year from today? You Answered Correct Answer 105.7 margin of error +/- 0.1

Answer 1

Today

$ 1 = Yen 111

Int Rate in US is 1.1%

Int Rate in Japan 1%

Acc to IRPT

$ 1 * (1+0.011) = Yen 111 * (1+0.01)

$ 1 ( 1.011 ) = Yen 111 (1.01)

$ 1 = Yen 111 * 1.01 / 1.011

= Yen 110.89

After 1 Year we can buy 110.89 Yen per $.