On August 8th the three-month risk-free rate of interest in the United States was 3.75 percent and it was 3.00 percent in Japan
. If the spot exchange rate were $0.010798/yen, what would you expect the forward exchange rate to be?
1 answer:
Answer:
The answer is 0.01082
Explanation:
The formula for forward exchange rate is:
F = S x 1+rd/1+rf
where F is the forward exchange rate
S is the spot exchange rate(0.010798)
rd is the foreign currency interest rate(3% or 0.03)
rf is the domestic interest rate(3.75% or 0.0375
Month is 3 months(90days) and total number of days in a year is 360days.
Find find the attached file for calculation
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