Assume the following: the current spot rate S¥/$ = 100.0 and the annual interest rates: iJAPAN = 2% and iUS = 10%.According to covered interest parity,if an intern at Citibank sets the one-year forward rate: F360¥/$ = 91,then:
A) the intern has correctly set the forward rate.
B) both U.S. and Japan's investment returns are equal.
C) the Japan's investment return exceeds the U.S. investment return
D) the U.S. investment return exceed the Japan's investment return
Correct Answer:
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