Assume the current U.S. dollar-yen spot rate is 125¥/$. Further, the current nominal 180-day rate of return in Japan is 3% and 4% in the United States. What is the approximate forward exchange rate for 180 days?

Question

Quizplus · Accepted Answer

The formula for the approximate forward exchange rate is:

Forward exchange rate = Spot rate x (1 + foreign interest rate / 1 + domestic interest rate)^time

Plugging in the given values, we get:

Forward exchange rate = 125¥/$ x (1 + 0.03 / 1 + 0.04)^0.5

Forward exchange rate = 124.39¥/$ (rounded to two decimal places)

Therefore, the best choice is C, as it is the closest option to the calculated value.

Assume the Current U