Homework Answers
(a) Initial Exchange Rate = 108.46 / $ and Final Exchange Rate = 107.13 / $
As is observable, $ 1 could purchase greater amount of Yens at spot rate as compared to three-months later. Hence, the Yen gets stronger relative to the $.
(b) Approximate Difference in USD and Japanese Inflation Rates ~ % Change in Exchange Rate = [(108.46-107.13) / 108.46] x 100 ~ 1.24 %
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