Question

The spot exchange rate is S(X120/$1). The U.S. Interest rate is 4 percent APR. The Japanese interest rate is 2 percent APR. What is the no-arbitrage 90- day forward rate? Multiple Choice 2249 Ο Ο 41223529/s1 Ο Ο 4120.597o/s1 Ο None of the options. Ο 817692381 Ο 194059/$1 The $/€ bid and ask prices are $145/€ and $1.48/€, respectively. The €/$ bid and ask prices are: 35 Multiple Choice A O2 ABS $1.48/Ε1 and $1.45/€1. €0.6757/s1 and €0.6897/81. €0.6897/S1 and E0.6757/$1. None of the options. €0.6623/$1 and €0.6667/$1.

Answer 1

1.
=(Spot Yen/$*(1+yen interest rate*90/360))/(1+US interest rate*90/360)
=(120*(1+2%*90/360))/(1+4%*90/360)
=119.40594 Yen/$

2.
Bid=1/1.48=0.67568 Euro/$1

Ask=1/1.45=0.68966 Euro/$1