The current spot exchange rate between the Japanese yen and the Canadian dollar is ×105/$.The yen is expected to appreciate by 5% against the dollar over the next six months.What do you expect the spot exchange rate between the yen and the dollar to be six months from now?

Question

Quizplus · Accepted Answer

If the yen is expected to appreciate by 5% against the dollar, the new exchange rate would be ×100/$. Multiplying the current exchange rate with the new exchange rate we get 105/100 = ×1.05/$. Thus, in six months, the exchange rate between the yen and the dollar would be ×99.75/$ (105/1.05).

The Current Spot Exchange Rate Between the Japanese Yen and the Canadian