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Given 1-year ZCB securities with 2.5% yield in USD and 0.5% yield in JPY, and a spot exchange rate of USD/JPY at 118.05, what expected
Given 1-year ZCB securities with 2.5% yield in USD and 0.5% yield in JPY, and a spot exchange rate of USD/JPY at 118.05, what expected spot exchange rate in 1-year would result in a break-even between the two instruments? Which bond would be a better investment given a 1Y forward exchange rate of USD/JPY 119.03?
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