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 <
B) If RUS < RJ, then E <
C) If RUS > RJ, then E >
D) If RUS < RJ, then F =E.
E) There is no consistent relationship that can be predicted.
Correct Answer:
Verified
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