Question

30. Suppose the spot US$ yen exchange rate is .0089; the annual US$ rate is .011; the annual yen rate is .003, what is the 1-year forward rate

Answer 1

Answer: $0.0090/Yen

Explanation:

Based on the information given, the 1-Year forward rate will be calculated as:

= 0.0089 x (1+0.011) / (1+0.003)

= (0.0089 × 1.011)/1.003

= 0.89979/1.003

= 0.008971

= 0.0090 approximately

= $0.0090/Yen