The interest rate in the Australia is $10\%$ p$.$a$.$; in Japan, the comparable rate is $7\%$ p$.$a$.$ The spot rate for the yen is AUD $0\mathrm{.}0123.$ If interest rate parity holds, whether is the yen traded at forward premium or discount? What is the $180-$day forward rate?

Question $10$Answer

a$.$

Forward premium; $0\mathrm{.}01248$ AUD$/$JPY

b$.$

Forward discount; $0\mathrm{.}01248$ AUD$/$JPY

c$.$

Forward premium; $0\mathrm{.}01264$ AUD$/$JPY

d$.$

Forward discount; $0\mathrm{.}01212$ AUD$/$JPY

e$.$

Forward discount; $0\mathrm{.}01196$ AUD$/$JPY