Assume interest rate parity holds. The one-year risk-free rate in the U.S. is 3.38 percent and the one-year risk-free rate in Japan is 3.75 percent. The spot rate between the Japanese yen and the U.S. dollar is ¥112.65/$. What is the one-year forward exchange rate?

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter8: Relationships Among Inflation, Interest Rates, And Exchange Rates
Section: Chapter Questions
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Assume interest rate parity holds. The one-year risk-free rate in the U.S. is 3.38 percent and the one-year risk-free rate in Japan is 3.75 percent. The spot rate between the Japanese yen and the U.S. dollar is ¥112.65/$. What is the one-year forward exchange rate?
Assume interest rate parity holds. The one-year risk-free rate in the U.S. is 3.38 percent and the one-year risk-free rate in Japan is 3.75 percent. The spot rate between the
Japanese yen and the U.S. dollar is ¥112.65/$. What is the one-year forward exchange rate?
Multiple Choice
¥114.92/$
¥112.65/$
¥115.89/$
¥112.25/$
¥113.05/$
Transcribed Image Text:Assume interest rate parity holds. The one-year risk-free rate in the U.S. is 3.38 percent and the one-year risk-free rate in Japan is 3.75 percent. The spot rate between the Japanese yen and the U.S. dollar is ¥112.65/$. What is the one-year forward exchange rate? Multiple Choice ¥114.92/$ ¥112.65/$ ¥115.89/$ ¥112.25/$ ¥113.05/$
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