1.

4.21 The current fiveyear Euro yen rate is 6% per annum (compounded annually). The fiveyear Eurodollar rate is 8.5%. What is the implied forward premium or discount of the yen (over the current spot rate) for a fiveyear forward contract?

a) 4.17% premium

b) 18.46% discount

c) 11.00% discount

d) 12.36% premium

Ans: d

4.31 Suppose the pound devalues from $1.25 at the start of the year to $1.00 at the end of the year. Inflation during the year is 15% in England and 5% in the U.S. What is the real devaluation () or real revaluation (+) of the pound during the year?

a) 12.38%

b) 20.71%

c) + 2.39%

d) + 1.46%

Ans: a

PLEASE PROVIDE CLEAR STEP-BY-STEP ANSWER ON HOW TO GET THIS FIGURE