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Japanese Yen Forward.Use the following spot and forward bid-ask rates for the Japanese yen/U.S. dollar (/$) exchange rate from September 16, 2010, to answer the

Japanese Yen Forward.Use the following spot and forward bid-ask rates for the Japanese yen/U.S. dollar (/$) exchange rate from September 16, 2010, to answer the following questions:

a. What is the mid-rate quote for each maturity?

b. What is the annual forward premium on the yen for all maturities? (Assume that the U.S. dollar is the home currency. Also use the Mid-Rate values computed in part a.)

c. Which maturities have the smallest and largest forward premiums?

(Click on the

icon to import the table into a spreadsheet.)

Period

/$ Bid Rate

/$ Ask Rate

spot

80.9780.97

81.0181.01

1 month

80.5680.56

80.5980.59

2 months

80.4180.41

80.4680.46

3 months

79.8979.89

79.9279.92

6 months

78.7278.72

78.7678.76

12 months

78.4478.44

78.4978.49

24 months

77.3377.33

77.3777.37

a. What is the mid-rate quote for each maturity?

Calculate the mid-rate for each maturity below:(Round to three decimal places.)

Days

Bid Rate

Ask Rate

Mid-rate

Period

Forward

/$

/$

/$

Spot

0

80.97

81.01

80.990

1 month

30

80.56

80.59

80.575

2 months

60

80.41

80.46

80.435

3 months

90

79.89

79.92

79.905

6 months

180

78.72

78.76

78.740

12 months

360

78.44

78.49

78.465

24 months

720

77.33

77.37

77.350

b. What is the annual forward premium on the yen for all maturities? (Assume that the U.S. dollar is the home currency.)

Calculate the annual forward premium for all maturities below. Use the Mid-Rate values computed in part

a..

(Round to three decimal places.)

Days

Bid Rate

Ask Rate

Forward

Period

Forward

/$

/$

Premium

Spot

0

80.97

81.01

1 month

30

80.56

80.59

6.180

%

2 months

60

80.41

80.46

4.140

%

3 months

90

79.89

79.92

5.431

%

6 months

180

78.72

78.76

%

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