stainht14. A Japanese investor can earn a I percent annual interest rate in Japan or about 3.5 percent peryear in the United States. If the spot exchange rate is 101 yen to the dollar, at what one-yearforward rate would an investor be indifferent between the U.S. and Japanese investments?A. VI00.58B. 98.56C. V101.68D. 197.42E. VI03.50An investor starts with $1 million and converts it to 0.75 million pounds, which is theninvested for one year. In a year the investor has 0.7795 millice pounds, which she thenconverts to dollars at an exchange rate of 0.72 pounds per dollar. The U.S. dollar anualrate of return eamed was15.

Question
Asked Nov 1, 2019
12 views
stainht
14. A Japanese investor can earn a I percent annual interest rate in Japan or about 3.5 percent per
year in the United States. If the spot exchange rate is 101 yen to the dollar, at what one-year
forward rate would an investor be indifferent between the U.S. and Japanese investments?
A. VI00.58
B. 98.56
C. V101.68
D. 197.42
E. VI03.50
An investor starts with $1 million and converts it to 0.75 million pounds, which is then
invested for one year. In a year the investor has 0.7795 millice pounds, which she then
converts to dollars at an exchange rate of 0.72 pounds per dollar. The U.S. dollar anual
rate of return eamed was
15.
help_outline

Image Transcriptionclose

stainht 14. A Japanese investor can earn a I percent annual interest rate in Japan or about 3.5 percent per year in the United States. If the spot exchange rate is 101 yen to the dollar, at what one-year forward rate would an investor be indifferent between the U.S. and Japanese investments? A. VI00.58 B. 98.56 C. V101.68 D. 197.42 E. VI03.50 An investor starts with $1 million and converts it to 0.75 million pounds, which is then invested for one year. In a year the investor has 0.7795 millice pounds, which she then converts to dollars at an exchange rate of 0.72 pounds per dollar. The U.S. dollar anual rate of return eamed was 15.

fullscreen
check_circle

Expert Answer

Step 1

According to the interest rate parity formula, forward rate can be calculated if the i...

help_outline

Image Transcriptionclose

Forward rate Current spot rate x (1+domestic currency interest rate) (1+foreign cumency interest rate) - 101x (1+0.01) (1+0.035) - 102.01/1.035 -¥98.56

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Finance

Foreign Exchange

Related Finance Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Gilmore, Inc., had equity of $130,000 at the beginning of the year. At the end of the year, the comp...

A: The maximum growth which a firm can achieve by using undistributed earnings is known as internal gro...

question_answer

Q: What are the three forms of Efficient MArket Hypothesis and what are the criticisms of each from the...

A: The Efficient Market Hypothesis means that the market investors have an entree to all information ob...

question_answer

Q: Figure 12.11 shows plots of monthly rates of return on three stocks versus the stock market index. T...

A: You have asked a question with five sub parts. I will address the first three. Please post the balan...

question_answer

Q: Debt Management Ratios Trina's Trikes, Inc. reported a debt-to-equity ratio of 1.94 times at the end...

A: Debt to equity ratio = Debt / Equity = 1.94Debt = $ 10.60 million

question_answer

Q: On March 9, 2009, the Dow Jones Industrial Average reached a new low at a close of 6,847.20, which w...

A: Calculate the return on stock market as follows:

question_answer

Q: 01 O63 9a How much money should be deposited today in an account that earns 5% compounded semiannual...

A: We need to use the concept of time value of money to solve the question. According to the concept of...

question_answer

Q: What is the annual opportunity cost of a checking account that requires a $300 minimum balance to av...

A: Opportunity cost is the potential loss of income on the amount invested in the checking account as m...

question_answer

Q: Gabriel, an accountant, earns $360,000 from his practice. He also receives $9,100 in dividends and i...

A: a) Computation of AGI:Hence, the AGI, when Gabriel does not participates in the operation of the bus...

question_answer

Q: ABC Trucking's balance sheet shows a total of noncallable $30 million long-term debt with a coupon r...

A: Hence, the correct answer is the option B. –0.44%