Assume the current U.S. dollar-yen spot rate is 90 ¥/$. Further, the current nominal 180-day rate of return in Japan is 1% (annu

Question

1 year ago

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alized) and 2% (annualized) in the United States. What is the approximate forward exchange rate for 180 days? ¥89.55/$ ¥89.12/$ ¥90.89/$ ¥90.45/$

1 answer:

Citrus2011 [14] · Answer 1 · 2023-12-11T10:29:54+03:00

Answer:

Explanation:

Forward excahnge rate/spot exchange rate = (1+rh)/(1+rf)

rh - periodic interest rate in the home currency

rf - periodic interest rate in the foreign currency

Forward/90 = [1+1%*180/360]/[1+2%*180/360]

Forward = 1.005/1.01 * 90 = 89.55

Forward rate is 89.55 yen/$