The 1 year interest rate in the U.S.is 1%.The spot exchange rate for yen is 84.81 to the dollar.The 6 months forward rate is 84.78 to the dollar.These prices indicate that interest rates in Japan,on an annualized basis,are about

Question

Quizplus · Accepted Answer

To calculate the interest rates in Japan, we can use the formula:

(1 + U.S. interest rate) x (current spot rate / forward rate) - 1

Plugging in the values given:

(1 + 0.01) x (84.81 / 84.78) - 1 = 0.000703 or 0.07%

This means that the interest rates in Japan are 0.07% higher than in the U.S. So, the correct answer is B.

The 1 Year Interest Rate in the U