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(a) Suppose you were an American, the quotation of spot exchange rate, one-month forward rate and three-month forward rate for Japanese yen Table 5.1 USD/JPY
(a) Suppose you were an American, the quotation of spot exchange rate, one-month forward rate and three-month forward rate for Japanese yen Table 5.1 USD/JPY exchange rate USD/JPY 121.50 Spot (So) 1-month forward (FI) 121.95 3-month forward (F 122.70 Note: rates are quoted in indirect format i. With the above quotations, discuss whether the yen is expected to (4 marks) appreciate or depreciate against the dollar in future. ii. Applying the approximate Interest Rate Parity (IRP) equation (6 marks) provided on page 8, based on spot rate and 3-month forward rate calculate the annualized interest rate differential between Japan and United States. Which country has a higher nominal interest rate
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