Today in the spot market $1 = 1.82 Swiss francs and $1 = 130 Japanese yen. In
Question:
Today in the spot market $1 = 1.82 Swiss francs and $1 = 130 Japanese yen. In the 90-day forward market, $1 = 1.84 Swiss francs and $1 = 127 Japanese yen. Assume that interest rate parity holds worldwide. Which of the following statements is most CORRECT?
a. Interest rates on 90-day risk-free U.S. securities are higher than the interest rates on 90-day risk-free Swiss securities.
b. Interest rates on 90-day risk-free U.S. securities are higher than the interest rates on 90-day risk-free Japanese securities.
c. Interest rates on 90-day risk-free U.S. securities equal the interest rates on 90-day risk-free Japanese securities.
d. Since interest rate parity holds interest rates should be the same in all three countries.
e. Interest rates on 90-day risk-free U.S. securities equal the interest rates on 90-day risk-free Swiss securities.
Accounting Information Systems
ISBN: 978-1133935940
10th edition
Authors: Ulric J. Gelinas, Richard B. Dull