One-year risk-free us security


Problem:

Assume the spot rate for the Japanese yen currently is ¥99.31 per $1 and the one-year forward rate is ¥97.62 per $1. A risk-free asset in Japan is currently earning 2.5 percent.

Required:

Question: If interest rate parity holds, approximately what rate can you earn on a one-year risk-free U.S. security?

  • 1.63 percent
  • 4.20 percent
  • 5.01 percent
  • 4.96 percent
  • 2.11 percent

Note: Provide thorough explanation of the given question.

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Accounting Basics: One-year risk-free us security
Reference No:- TGS0892286

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