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The 180-day T-bills have a nominal interest rate of 3% in the U.S. while the default-free bonds maturing in 180-day have a nominal interest rate of 4.5% in Japan? If the spot exchange rate for 1 yen equals $0.0150, what would be the 180-day forward exchange rate using the interest rate parity formula?

In the previous question, suppose the forward exchange rate between the Japanese yen and the U.S. dollar is 1 yen=$0.0148 while the spot exchange rate and the U.S. interest rate remain the same. According to the interest rate parity theory, what should be 180-day risk-free nominal interest rate in Japan?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92778417

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