An investor in the US can invest in the US, and earn an interest rate of 5.55%, or invest in Japan and earn 9.55%. The currentexchange rate is Et and the future exp. exchange rate is Et+1 = 10. If the investor claims that the two future values are the same,then E; must beO 10.11O 9.63O 9.44O 9.89

Answer: Calculation of the value of the Et: Formula, Forward rate = Spot rate x [(1+ Interest rate…

An investor in the US can invest in the US, and earn an interest rate of 5.55%, or invest in Jápan and exchange rate is E; and the future exp. exchange rate is E+1 = 10. If the investor claims that the two future values are the same, then E, must be O 10.11 O 9.63 O 9.44 O 9.89

An investor in the US can invest in the US, and earn an interest rate of 5.55%, or invest in Jápan and exchange rate is E; and the future exp. exchange rate is E+1 = 10. If the investor claims that the two future values are the same, then E, must be O 10.11 O 9.63 O 9.44 O 9.89

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

An investor in the US can invest in the US, and earn an interest rate of 5.55%, or invest in Japan and earn 9.55%. The current
exchange rate is Et and the future exp. exchange rate is Et+1 = 10. If the investor claims that the two future values are the same,
then E; must be
O 10.11
O 9.63
O 9.44
O 9.89

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