FIN 534 RANK Change The World /fin534rank.com FIN 534 RANK Change The World /fin534rank.com | Page 177

Which of the following statements is CORRECT?
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FIN 534 Week 10 Chapter 17 Solution
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In Japan, 90-day securities have a 4% annualized return and 180-day
securities have a 5% annualized return. In the United States, 90-day
securities have a 4% annualized return and 180-day securities have an
annualized return of 4.5%. All securities are of equal risk, and Japanese
securities are denominated in terms of the Japanese yen. Assuming that
interest rate parity holds in all markets, which of the following
statements is most CORRECT?
a. The yen-dollar spot exchange rate equals the yen-dollar exchange rate
in the 90-day forward market.
b. The yen-dollar spot exchange rate equals the yen-dollar exchange rate
in the 180-day forward market.
c. The yen-dollar exchange rate in the 90-day forward market equals the
yen-dollar exchange rate in the 180-day forward market.
d. The spot rate equals the 90-day forward rate.
e. The spot rate equals the 180-day forward rate.