1. Suppose that in Japan the interest rate is 4% and US interest rate is 3%. What is the best estimate of the one year forward exchange premium (discount) on the yen against dollar?
2. What are the benefits of ratio analysis? What are the limitations of ratio analysis? What can be done to minimize the limitations on ratio analysis? Explain. Cite any references used.
3. The one-year interest rate is 9% on British pounds and 7% on U.S. dollars. If the current exchange rate is $1.58 = £1, what is the expected future exchange rate in one year?