Use the following information to answer question 5 and 6 Suppose that the current spot exchange rate

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Question:

Use the following information to answer question 5 and 6 Suppose that the current spot exchange rate between Japanese Yen and Euro is ¥130/€ and the one-year forward exchange rate is ¥138.25/€. The one-year interest rate is 2.0 % in yens and 1.25% in euro.

According to the Interest Rate Parity condition, what is the 1 year forward exchange rate?

a. ¥139.27/€

b. ¥130.96/€

c. ¥129.04/€

d. ¥137.23/€