Question: HOMEWORK ASSIGNMENT NUMBER FOUR INTEREST RATE PARITY . The Current Exchange Rate between Japan and U.K. is One British Pound Equals 120 Japanese Yen. The

HOMEWORK ASSIGNMENT NUMBER FOUR

INTEREST RATE PARITY .

The Current Exchange Rate between Japan and U.K. is One British Pound Equals 120 Japanese Yen. The one year Annual Interest Rate in Japan is 1%, while the Annual Interest Rate in U.K. is 3% .

Given this, what would you expect the Forward Rate to be between Japanese Yen and British Pounds, one year from now? Explain your steps.

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