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Assume the spot USD/JPY exchange rate is 96 (1 USD = 96 JPY). The continuously compounded risk-free interest rate is 1% per annum in the

Assume the spot USD/JPY exchange rate is 96 (1 USD = 96 JPY). The continuously

compounded risk-free interest rate is 1% per annum in the US and 3% per annum in

Japan. Assume that the volatility of the USD/JPY exchange rate is 25% per annum.

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