According to the interest parity condition,if the U.S. interest rate is 2 percent and the Japanese interest rate is 4%,and the current exchange rate is 100 yens per dollar. Then the market expects the future exchange rate to be ________ yens per dollar.

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Quizplus · Accepted Answer

The interest parity condition states that the expected change in the exchange rate is equal to the difference in interest rates between the two countries. In this case, the U.S. interest rate is 2% and the Japanese interest rate is 4%, so the expected change in the exchange rate is 4% - 2% = 2%. This means that the market expects the future exchange rate to be 100 yens per dollar * (1 + 2%) = 102 yens per dollar.

According to the Interest Parity Condition,if the U