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Let RUS Be the Annual Risk Free Rate in the United

Question 12

Multiple Choice

Let RUS be the annual risk free rate in the United States,RJ be the risk free rate in Japan,F be the futures price of $/yen for a 1-year contract,and E the spot exchange rate of $/yen.Which one of the following is true?


A) if RUS > RJ, then E < F
B) if RUS < RJ, then E < F
C) if RUS > RJ, then E > F
D) if RUS < RJ, then F = E
E) There is no consistent relationship that can be predicted.

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