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Assume that the interest parity condition holds. Suppose that the current Japanese yen/US dollar exchange rate is given as 140 yen per dollar. Assume that
Assume that the interest parity condition holds. Suppose that the current Japanese yen/US dollar exchange rate is given as 140 yen per dollar. Assume that the dollar interest rate is 1 percent per year and the expected rate of return of a dollar deposit in terms of yen is given as 0.3 percent per year. In this case we expect that the yen/dollar exchange rate will become yen per dollar in a year. Hint: You can utilize the simple formula (for calculating the rates of return) we studied in class. a. 142.8 b. 139.02 c. 42 d. 140.98 e. None of above
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