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Suppose that 2-year interest rates are 4.5% in the United States and 1.07% in Japan and that spot exchange rate is JPY98.28 = USD1. Suppose
Suppose that 2-year interest rates are 4.5% in the United States and 1.07% in Japan and that spot exchange rate is JPY98.28 = USD1. Suppose that 1 year later, interest rates are 2.66% in both countries, while the value of the yen has appreciated to JPY95.65 = USD1. a. Benjamin Pinkerton from New York invested in a U.S. 2-year zero- coupon bond at the start of the period and sold it after 1 year. What was his return? b. Madame Butterfly from Osaka bought some dollars. She invested them in a one-year dollar bond and sold it after 1 year. What was her return in yen? (For all requirements, Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) a. Rate of return % % b. Rate of return
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