Question $1$

If the spot exchange rate is yen $\frac{140}{}1$ and the one year forward exchange rate is

yen $\frac{130}{}1.$ Then the euro is at a forward:

A$)$ discount and the one year European interest rate is lower than the one year Japanese

interest rate.

B$)$ discount and the one year European interest rate is higher than the one year Japanese

interest rate.

C$)$ premium and the one year European interest rate is lower than the one year Japanese

interest rate.

D$)$ premium and the one year European interest rate is higher than the one year Japanese

interest rate.