Six month T-bill have a normal rate of 7%, while default ...
Six month T-bill have a normal rate of 7%, while default-free Japness bonds that mature in 6 months haolds have a norimal rate of 5.5%. In the spot exchange market, 1 yen equals 0.009. If interest rate partly holds, what is the 6-monh forward exchange rate?
rNom, 6-month T-bills = 7%; rNom of similar default-free 6-month Japanese bonds = 5.5%; Spot exchange rate: 1 Yen = $0.009; 6-month forward exchange rate = ft = ?
[pic].
rf = 5.5%/2 = 2.75%.
rh = 7%/2 = 3.5%.
e0 = $0.009.
[pic] = [pic]
1.0275 ft = $0.00932
ft = $0.00907.
The 6-month forward exchange rate is 1 yen = $0.00907.
................
................
In order to avoid copyright disputes, this page is only a partial summary.
To fulfill the demand for quickly locating and searching documents.
It is intelligent file search solution for home and business.