Suppose that 2-year interest rates are 5.2% in the United States and 1.0% in Japan and...

 

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Suppose that 2-year interest rates are 5.2% in the United States and 1.0% in Japan and that spot exchange rate is JPY98.63 = USD1. Suppose that 1 year later, interest rates are 3% in both countries, while the value of the yen has appreciated to JPY96.00 = USD1. a. Benjamin Pinkerton from New York invested in a U.S. 2-year zero-coupon bond at the start of the period and sold it after 1 year. What was his return? b. Madame Butterfly from Osaka bought some dollars. She also invested in the one-year U.S. zero-coupon bond and sold it after 1 year. What was her return in yen? (For all requirements, Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) a. b. Rate of return Rate of return 7.45 % % Suppose that 2-year interest rates are 5.2% in the United States and 1.0% in Japan and that spot exchange rate is JPY98.63 = USD1. Suppose that 1 year later, interest rates are 3% in both countries, while the value of the yen has appreciated to JPY96.00 = USD1. a. Benjamin Pinkerton from New York invested in a U.S. 2-year zero-coupon bond at the start of the period and sold it after 1 year. What was his return? b. Madame Butterfly from Osaka bought some dollars. She also invested in the one-year U.S. zero-coupon bond and sold it after 1 year. What was her return in yen? (For all requirements, Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) a. b. Rate of return Rate of return 7.45 % %

Answer rating: 100% (QA)

a The spot exchange rate is JPY 9600 USD 1 and BJ from NY invested in US 2 year zerocoupon bonds The ... View the full answer