Question 21.5: Parity Check Suppose the exchange rate for Japanese yen, S0,...

Fundamentals of Corporate Finance Standard Edition

Parity Check

Suppose the exchange rate for Japanese yen, $S_{0}$ , is currently ¥120=$1.If the interest rate in the United States is $R_{US} =10\%$ and the interest rate in Japan is $R_{J} =5\%$ ,then what must the forward rate be to prevent covered interest arbitrage?

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