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Suppose that 2-year interest rates are 5.0% in the United States and 1.02% in Japan and that spot exchange rate is JPY98.53 = USD1. Suppose
Suppose that 2-year interest rates are 5.0% in the United States and 1.02% in Japan and that spot exchange rate is JPY98.53 = USD1. Suppose that 1 year later, interest rates are 2.76% in both countries, while the value of the yen has appreciated to JPY95.90 = 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.)
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