Assume that the U.S. interest rate on 1-year deposits is 2% and the Japanese interest rate on 1-year deposits is 2%. i.e. R$= Ry= 0.02.
Assume that the U.S. interest rate on 1-year deposits is 2% and the Japanese interest rate on 1-year deposits is 2%. i.e. R$= Ry= 0.02. The expected exchange rate between the yen and the USD one year from now is Eex/$ = 115.70. ~ a. If FX markets are in equilibrium (i.e. UIP holds), what is the current spot exchange rate of yen per dollars (Ex/$) ?
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