Derek Tosh and Yen-Dollar Parity.Derek Tosh is attempting to determine whether US/Japanese financial conditions are at parity. The current spot rate is a flat

89.00/$,

while the 360-day forward rate is

84.90/$.

Forecast inflation is

1.104%

for Japan, and

5.899%

for the US. The 360-day euro-yen deposit rate is

4.697%,

and the 360-day euro-dollar deposit rate is

9.496%.

a. Calculate whether international parity conditions hold between Japan and the United States.

b. Find the forecasted change in the Japanese yen/U.S. dollar (/$) exchange rate one year from now.

Question content area bottom

Part 1

a. Calculate whether international parity conditions hold between Japan and the United States.

The forecast difference in rates of inflation is

enter your response here%

(U.S. higher than Japan).