Suppose that the US interest rate is 5.4% per annum and the interest rate in Japan is 2.8% per annum. The value of the US dollar in the spot market is ¥74 what must the forward exchange rate be (yen per US dollar) for There to be no risk less profit? (Enter the numerical value only rounding to one decimal place) The forward rate you calculate above will be different and different from the spot rate explain why it cannot be the same

Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter11: Foreign Exchange, Trade, And Bubbles
Section: Chapter Questions
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Suppose that the US interest rate is 5.4% per annum and the interest rate in Japan is 2.8% per annum.
The value of the US dollar in the spot market is ¥74

what must the forward exchange rate be (yen per US dollar) for There to be no risk less profit? (Enter the numerical value only rounding to one decimal place)

The forward rate you calculate above will be different and different from the spot rate explain why it cannot be the same

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