At a point in time, foreign exchange arbitrageur noticed that the Japanese yen to U.S. dollar spot exchange rate was $:¥=108 and the three-month forward exchange rate was $:¥=107.30. The three-month $ interest rate was 5.20 percent per annum and the three-month ¥ interest rate was 1.20 percent per annum.
a. Was interest rate parity holding?
