Suppose you have $1,000,000 to invest for one year. One-year interest rate is 1% in Japan and 4% in the United States. The current exchange rate is 120 yen per dollar, and you can enter a one-year forward contract with the exchange rate of 115 yen per dollar. Which county should you invest in and why?

Suppose you have $1,000,000 to invest for one year. One-year interest rate is 1% in Japan and 4% in the United States. The current exchange rate is 120 yen per dollar, and you can enter a one-year forward contract with the exchange rate of 115 yen per dollar. Which county should you invest in and why?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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