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Suppose that the current Japanese yen/US dollar exchange rate is 135 yen per dollar. We also assume that the expected rate of return of dollar
Suppose that the current Japanese yen/US dollar exchange rate is 135 yen per dollar. We also assume that the expected rate of return of dollar deposit in terms of yen is 3 percent per year. Suppose also that we expect that the yen/dollar exchange rate will become 137.7 yen per the dollar interest rate is around percent per year. Hint: You can utilize the simple formula (for calculating the rates of return) we studied in class. a. 0.01 b. 0.1 c. 1 d. 10 e. None of above
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