Question: Look at Table. a. How many Japanese yen do you get for your dollar? b. What is the one-month forward rate for yen? c. Is

Look at Table.

a. How many Japanese yen do you get for your dollar?

b. What is the one-month forward rate for yen?

c. Is the yen at a forward discount or premium on the dollar?

d. Use the one-year forward rate to calculate the annual percentage discount or premium on yen.

e. If the one-year interest rate on dollars is 1.5% annually compounded, what do you think is the one-year interest rate on yen?

f. According to the expectations theory, what is the expected spot rate for yen in three monthsâ€™ time?

g. According to purchasing power parity theory, what then is the expected difference in the three-month rate of price inflation in the United States andJapan?

Look at Table. a. How many Japanese yen do you

D TABLE Forward Rate 3 Month Spot Rate1 Month 1 Year Europe Euro Norway (krone) Sweden (krona) Switzerland (franc) United Kingdom (pound) 1.4201 6.2452 7.4533 1.0723 1.6414 1.4201 6.2502 7.4523 1.0719 1.6413 1.4200 6.2603 7.4502 1.0711 1.6411 1.4207 6.3007 7.4313 1.0643 1.6396 Americas Canada (dollar) Mexico (peso) 1.0808 13.2155 1.0807 13.2705 2 1.0804 13.3805 2 1.0801 13.8891 2 Pacific/Middle East/Africa: Hong Kong (dollar) Japan (yen) South Africa (rand) South Korea (won) 7.7501 94.7050 7.7840 7.7480 7.7437 94.6161 7.9263 7.7311 94.0870 8.3283 94.6780 7.8330 1249.10 1247.65 0 1249.55 1241.05

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