Question
1.Interest Rate Parity The nominal yield on 6-month T-bills is 7%, while default-free Japanese bonds that mature in 6 months have a nominal rate of
1.Interest Rate Parity
The nominal yield on 6-month T-bills is 7%, while default-free Japanese bonds that mature in 6 months have a nominal rate of 4%. In the spot exchange market, 1 yen equals $0.011. If interest rate parity holds, what is the 6-month forward exchange rate? Round the answer to five decimal places. Do not round intermediate calculations.
2.Cross Rates
At today's spot exchange rates 1 U.S. dollar can be exchanged for 9 Mexican pesos or for 110.49 Japanese yen. You have pesos that you would like to exchange for yen. What is the cross rate between the yen and the peso; that is, how many yen would you receive for every peso exchanged? Round your answer to two decimal places.
(I need to make sure my decimal placement is correct.)
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