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A Japanese student is planning on studying for a year at a German university. She desires to save sufficient Japanese yen today to cover the
A Japanese student is planning on studying for a year at a German university. She desires to save sufficient Japanese yen today to cover the year's tuition costs of 35,000. Suppose that the student has two choices: (a) saving yen in a Japanese account that pays an annual interest rate of 1.18 percent and buying euros forward one year at the current forward exchange rate of 96.846 \/, or (b) buying euros today at the current spot exchange rate of 94.583 / and saving the proceeds in a German account that pays an annual interest rate of 3.26 percent. Calculate how many yen each option would require and determine which of the two options the student should choose
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