Derek Tosh is attempting to determine whether? US/Japanese financial conditions are at parity. The current spot rate is a flat ?¥89.00?/$, while the? 360-day forward rate is ?¥84.90?/$. Forecast inflation is 1.101?% for? Japan, and 5.905% for the US. The? 360-day euro-yen deposit rate is 4.704?%, and the? 360-day euro-dollar deposit rate is 9.505?%.
1. Calculate whether international parity conditions hold between Japan and the United States. The forecast difference in rates of inflation is_%
2. Find the forecasted change in the Japanese? yen/U.S. dollar? (¥/$) exchange rate one year from now.