On February 8, 1991, the U.S. dollar/British pound spot rate was U.S. \(\$ 1.9905\) per pound and the U.S. dollar/Japanese yen spot rate was U.S. \(\$ 0.00779\) per yen. The following forward rates were also quoted:

a. Explain what someone who enters into a 30 day forward contract to deliver British pounds is agreeing to do.

b. Explain what someone who enters into a 90 -day forward contract to buy Japanese yen is agreeing to do.

c. What can you infer about the relationship between U.S. and British short-term interest rates and U.S. and Japanese short-term interest rates?

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30 days 60 days 90 days British Pound 1.9908 1.9597 1.9337 Japanese Yen 0.007774 0.007754 0.007736