Question
You are given the following data: 1-year nominal risk free rate in dollar area(I USD )=5.053% 1-year nominal risk free rate in JPY area(I JPY
You are given the following data:
1-year nominal risk free rate in dollar area(IUSD )=5.053%
1-year nominal risk free rate in JPY area(IJPY )=8.158%
Real risk free rate = 3.5%
Current spot exchange rate: =JPY115.60/USD
(1) How much is the 1-year forward exchange rate according to Interest Rate Parity?
(2) What is the forward premium/discount on JPY?
(3) How much is the expected spot exchange rate in 1-year according to Purchasing Power Parity?
(4) What is the forecast percentage change in the spot rate of JPY?
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Financial and Managerial Accounting Using Excel for Success
Authors: James Reeve, Carl S. Warren, Jonathan Duchac
1st edition
978-1111993979
