Suppose a U.S. investor buys a default-free 90-day Japanese bond that promises a 4% nominal return, denominated in yen. Assume that the spot and forward exchange rates are those described in the previous section, i.e., indirect spot = 77.06 and forward rates as shown above. Spot exchange rate: dollars 1 yen will buy now = 1/B67 = 1/77.06 0.01298 Forward exchange rate: dollars 1 yen will buy in future =1/D67 = 1/76.98 0.01299 Foreign nominal interest rate 4% Time to maturity on securities (in fraction of year) 0.25 Foreign periodic rate (annual rate times fraction of year) = 4%(0.25) = 1% (1+r n) / (1+r) fileo Suppose a U.S. investor buys a default-free 90-day Japanese bond that promises a 4% nominal return, denominated in yen. Assume that the spot and forward exchange rates are those described in the previous section, i.e., indirect spot = 77.06 and forward rates as shown above. Spot exchange rate: dollars 1 yen will buy now = 1/B67 = 1/77.06 0.01298 Forward exchange rate: dollars 1 yen will buy in future =1/D67 = 1/76.98 0.01299 Foreign nominal interest rate 4% Time to maturity on securities (in fraction of year) 0.25 Foreign periodic rate (annual rate times fraction of year) = 4%(0.25) = 1% (1+r n) / (1+r) fileo