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The following information was available: spot rate for Japanese Yen: $0.009437; 1,460-day forward rate for Japanese Yen: $0.013431 (assume a 365 day year); U.S. risk-free
The following information was available: spot rate for Japanese Yen: $0.009437; 1,460-day forward rate for Japanese Yen: $0.013431 (assume a 365 day year); U.S. risk-free rate: 6.00 percent; Japanese risk-free rate: 4.00 percent. Assuming annual compounding, determine whether interest rate parity holds and, if not, suggest an arbitrage strategy.
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