17 Below are the Consumer Price Index inflation rates each year for the United States andJapan. Also shown is the spot exchange rate for the beginning of each year.a. Using PPP equation, compute what the 1-year forward exchange rate should be eachyear. (Round your answers to 4 decimal places.)Year199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013Beginning of YearExchange Rate (Yen Per$)146.50134.85124.75125.65112.75100.77104.17115.74132.65112.40101.95114.98132.27120.11107.20103.08116.59119.08109.9591.3792.8080.4575.4686.22US CPIInflation Rate6.63.1NONōGESLEE'NN2.92.8272.53.31.71.6273.41.62.41.9am & inmm3.33.4№2.54.10.0ON62842.61.2して:N2.81.4Japan CPIInflation Rate3.63.21.61.10.5- 0.30.61.6000-60.9+ i-0.4- 0.9-0.9- 1.1- 0.30.0- 0.40.30.41.21.30.20.30.1Predicted ExchangeRate

1.Purchasing power parities (PPPs) are the rates of currency conversion that try to equalise the…

Answered: Below are the Consumer Price Index…

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter7: International Arbitrage And Interest Rate Parity

Section: Chapter Questions

Problem 38QA

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Below are the Consumer Price Index inflation rates each year for the United States and Japan. Also shown is the spot exchange rate for the beginning of each year. a. Using PPP equation, compute what the 1-year forward exchange rate should be each year. (Round your answers to 4 decimal places.)