Answered: 1 Suppose that 1-year interest rate in…

1 Suppose that 1-year interest rate in US is 2%, 1-year interest rate in Japan is 3%, spot exchange rate is Yen 110/$, 1-year forward rate is Yen 112/$. Will you prefer to invest in Japan or in US?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

1
Suppose that 1-year interest rate in US is 2%, 1-year interest rate in Japan is 3%, spot exchange
rate is Yen 110/$, 1-year forward rate is Yen 112/$. Will you prefer to invest in Japan or in US?
No difference to invest in Japan or in US
A₁
B₁
C₁ In China
D₂
In US
In Japan

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