Key rates:

U.S.: 1.50% return on $-denominated bond.

Japan: 0.20% return on -denominated bond.

Forward: 106.952/$.

What is the equilibrium spot exchange rate between $ and ?

If the spot exchange rate is 108.734/$, show the transactions to conduct the CIA.

Draw a graph of international interest rate parity as those shown in the lecture notes to illustrate and explain your calculations in details.