The following information was available: spot rate for Japanese yen: $0.009313; 730-day forward rate for Japanese yen: $0.010475 (assume a 365-day year); U.S. risk-free rate: 7.0 percent; Japanese risk-free rate: 1.0 percent

a. Assuming annual compounding, determine whether interest rate parity holds and, if not, suggest a strategy.

b. Assuming continuous compounding, determine whether interest rate parity holds and, if not, suggest a strategy.