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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