Determining the japanese interest rate


Suppose that U.S. interest rates rise from 3% to 4% this year. The spot exchange rate quotes at 112.5 JPY/USD and the forward rate for a one-year contract is at 110.5. What is the Japanese interest rate?

A. 1.81%

B. 2.15%

C. 3.84%

D. 5.88%

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Finance Basics: Determining the japanese interest rate
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