Short term rates are 2 in japan and 4 in the united states


Short term rates are 2% in Japan and 4% in the United States. The current exchange rate is 120 yen per dollar. What is the expected forward exchange rate ?

Solution: 0.04 = 0.02 -(X-120)/120
x= 117.6

 

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Finance Basics: Short term rates are 2 in japan and 4 in the united states
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