Suppose the estimated slope coefficient in a regression of the rate of depreciation of the dollar relative

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Suppose the estimated slope coefficient in a regression of the rate of depreciation of the dollar relative to the yen on a constant and the forward discount on the dollar is -2, and the standard deviation of the forward discount, measured on an annualized basis, is 2.5%. What is a lower bound for the variability of the risk premium in the yen–dollar forward market?

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International Financial Management

ISBN: 978-0132162760

2nd edition

Authors: Geert Bekaert, Robert J. Hodrick

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