Question: The current spot exchange rate is 90 /$. The current 5-year U.S. Treasury rate of 4%. A risk free 5-year zero coupon debt in Japan

The current spot exchange rate is 90 /$. The current 5-year U.S. Treasury rate of 4%. A risk free 5-year zero coupon debt in Japan has a yield of 2%. Assume for simplicity that both rates are annually compounded rates. Based on the Interest Rate Parity, what is the forward exchange rate, F₅?

a.81.67

b.99.18

c.91.76

d.93.60

e.88.26

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