The spot rate between Japan and the U.S. is 104.02 = $1, while the 1-year forward rate is 105.13 = $1. A 1-year risk-free security in the U.S. is yielding 4.2%. What is the rate of return on a 1-year risk-free security in Japan assuming that interest rate parity exists? (Please explain the calculation.)

a. 5.08% b. 4.67% c. 5.31% d. 2.09% e. 1.88%