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The following are the spot and forward bid and ask rates for the Japanese yen/U.S. dollar...

The following are the spot and forward bid and ask rates for the Japanese yen/U.S. dollar (¥/$) exchange rate from January 20, 2011. By referring to these rates, answer the following questions (the US dollar is the home currency):

Period Yen/$ Bidrate Yen/$ Ask Rate spot 85.41 85.46

1 month 85.02 85.05

2 months 84.86 84.90

3 months 84.37   84.42     

a) Calculate the mid-rate for these maturities

b) Calculate the annual forward premium for these maturities

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