$($please view attached image on international finance and fill in the blue boxes as $\%)$ Flat $89\mathrm{.}00+$$$,$ while the $360-$day forward rate is $$84\mathrm{.}90+$$$.$ Forecast inflation is $1\mathrm{.}100\%$ for Japan, and $5\mathrm{.}900\%$ for the US$.$ The

$360-$day euro$-$yen deposit rate is $4\mathrm{.}700\%,$ and the $360-$day euro$-$dollar deposit rate is $9\mathrm{.}500\%.$

a$.$ Diagram and calculate whether international parity conditions hold between Japan and the United States.

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

a$.$

Approximate Form

$($please see attacched image and fill in the highlighted blue boxes as $\%)$ As is the always the case with parity conditions, the future spot rate is implicitly forecast to be equal to the forward rate,

the implied rate from the international Fisher effect, and the rate implied by purchasing power parity. Acoording to

Yazzie's calculations, the markets are indeed in equilibrium $--$ parity.

b$.$