Question

Answer questions 1 through 10 based on the following data: . 3-month ÚS (domestic) interest rate 1.50% . 3-month Japanese interest rate 1.00% . Current spot exchange rate - $0.090 per yen . Current forward exchange rate - $0.095 per yen 4. On a covered basis, the 3-month dollar-denominated rate of return on Japanese yen deposits is or so based on the exact formula. A) -4.32% B)-1.00% C) 6.61% D) 8.52% 5. On a covered basis, the 3-month dollar-denominated rate of return on Japanese yen deposits is or so based on the approximation formula A)-5.12% B) 6.56% C) 6.92% D) 7.15% 6. The Japanese ven trades at a forward against the dollar A) premium: 1.00% B) premium: 5.56% C) discount, 2.52% D) discount: 6.82% 7. The US dollar trades at a forwar of against the yen A) premium: 2.50% B) premium; 5.56 C) discount: 5.26% D) discount: 3.95% 8. As the data indicates, the forward market predicts that within three months A) the yen will appreciate about 2.5% against the US dollar B) the yen will appreciate about 3.75% against the US dollar C) the yen will depreciate about 5.56% against the US dollar D) none of the above

Answer 1

4)

B) -1.00%

5)

C) 6.92%

6)

A) premium 1.00%

7)

D) discount 3.95%

8)

D) none of the above