Caleb Fajardo and Yen-Dollar Parity. Caleb Fajardo is attempting to determine whether U.S./Japanese financial conditions are at parity. The current spot rate is a flat ¥89.00 = $1.00, while the 360-day forward rate is 84.90 = $1.00. Forecast inflation is 1.103% for Japan, and 5.901% for the United States. The 360-day euroyen deposit rate is 4.696 %, and the 360-day eurodollar deposit rate is 9.495%. a. Diagram and calculate whether international parity conditions hold between Japan and the United States. b. Find the forecasted change in the Japanese yen to U.S. dollar (= $1.00) exchange rate one year from now. a. Diagram and calculate whether international parity conditions hold between Japan and the United States. The forecast difference in rates of inflation is % (U.S. higher than Japan). (Round to one decimal place.)
Caleb Fajardo and Yen-Dollar Parity. Caleb Fajardo is attempting to determine whether U.S./Japanese financial conditions are at parity. The current spot rate is a flat ¥89.00 = $1.00, while the 360-day forward rate is 84.90 = $1.00. Forecast inflation is 1.103% for Japan, and 5.901% for the United States. The 360-day euroyen deposit rate is 4.696 %, and the 360-day eurodollar deposit rate is 9.495%. a. Diagram and calculate whether international parity conditions hold between Japan and the United States. b. Find the forecasted change in the Japanese yen to U.S. dollar (= $1.00) exchange rate one year from now. a. Diagram and calculate whether international parity conditions hold between Japan and the United States. The forecast difference in rates of inflation is % (U.S. higher than Japan). (Round to one decimal place.)
ChapterP3: Part 3: Exchange Rate Risk Management
Section: Chapter Questions
Problem 2Q
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Solve part a & b please
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