Question

2.The spot ER between the Chinese remnimbi and the Japanese yen is that each remnimbi buys...

2.The spot ER between the Chinese remnimbi and the Japanese yen is that each remnimbi buys 10 yen. If the interest rates are 2% in japan and 6% in China, what is the forward ER? Explain in a paragraph

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Forward Exchange Rate =

1 remnimbi = 10 yen

=

= 9.6226 yen

Since the interest Rate of China is higher the current of China i.e. remnimbi is at a forward discount. i.e. Earlier 1 remnimbi was equal to 10 yen but forward rate is 1 remnimbi = 9.6226 yen. So Chinese remnimbi is at a dicount while the Japanse Yen is at a premium.

NOTE: The answer to your question has been given below/above. If there is any query regarding the answer, please ask in the comment section. If you find the answer helpful, do upvote. Help us help you.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The spot rate between the Japanese yen and the U.S. dollar is ¥106.31/$, while the one-year...
The spot rate between the Japanese yen and the U.S. dollar is ¥106.31/$, while the one-year forward rate is ¥105.53/$. The one-year risk-free rate in the U.S. is 2.31 percent. If interest rate parity exists, what is the one-year risk-free rate in Japan? Select one: a. 2.68% b. 1.56% c. 2.87% d. 1.39% e. 3.07%
The following are the spot and forward bid and ask rates for the Japanese yen/U.S. dollar...
The following are the spot and forward bid and ask rates for the Japanese yen/U.S. dollar (¥/$) 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
Barry speculates in the foreign currency exchange market. Currently the spot price for the Japanese yen...
Barry speculates in the foreign currency exchange market. Currently the spot price for the Japanese yen is ¥129/$ and the 6-month forward rate is ¥128 /$. Barry believes the yen will become ¥126.00/$ in the next six months. To profit as a speculator, Barry should ________ at ________ . Select one: a. buy dollars; the forward rate b. sell yen; the forward rate c. buy yen; the forward rate d. buy dollars; spot rate
1. You are given the following information. The Japanese currency is called the yen. The Korean...
1. You are given the following information. The Japanese currency is called the yen. The Korean currency is the won. The current nominal interest rate for a 1-year yen deposit in a Japanese bank is 1% (0.01), and it is 5% (0.05) for a deposit in a Korean bank. - The current spot exchange rate between the Japanese yen and Korean won (yen/won) is 100 that is one hundred yen to purchase one won. Answer the following questions. Make clear...
11. Suppose that on January 1, the cost of borrowing Japanese yen for the year is...
11. Suppose that on January 1, the cost of borrowing Japanese yen for the year is 4%. Market expectation for the inflation is 3% in the U.S. and 2% in Japanese. At the same time, the spot rate is ¥111.2/$ on January 1 while the 12 month forward rate is ¥108.5/$. a. What is the interest rate expected in U.S. if the interest rate parity holds?     What is the real interest rate in Japan and what is the real interest...
One year ago, the spot exchange rate between Japanese yen and Swiss franc was S_1Y/SFR =...
One year ago, the spot exchange rate between Japanese yen and Swiss franc was S_1Y/SFR = ¥160/SFr/ Today, the spot rate is S_0 ^¥/Sfr = ¥155/SFr. Inflation during the year was p^¥ = 2 percent and p^SFr= 3 percent in Japan and Switzerland, respectively. a.) What was the percentage change in the nominal value of the Swiss franc? b.) One year ago, what nominal exchange rate would you have predicted for today based on the difference in inflation rates? c.)...
You have $1,000,000 to start with. Yen Spot rate =106 Yen/$ Yen FWD Rate=103.5 Yen/$ Interest...
You have $1,000,000 to start with. Yen Spot rate =106 Yen/$ Yen FWD Rate=103.5 Yen/$ Interest rates in Japan are 4% per album (2% for 6 months). Interest Rate in the USA are 8% per annum(4% for 6 months) for securities of similar risk and maturity. What should you do?
The spot rate of exchange of Japanese yen for US dollars is currently 100 yen per...
The spot rate of exchange of Japanese yen for US dollars is currently 100 yen per dollar but the one year forward rate is 101 yen per dollar. Determine the yield on a one year zero coupon US government security if the corresponding yield on a Japanese government security is 2%.If the yield on a one-year zero-coupon US government security was higher than what you calculated, how would you exploit this arbitrage opportunity?
A Japanese investor can earn a 4.25% interest rate in Japan or 3.75% in the U.S....
A Japanese investor can earn a 4.25% interest rate in Japan or 3.75% in the U.S. The spot exchange rate is 105 yen to the dollar. At what forward rate would an investor be indifferent between the U.S. and Japanese investments? What would you do if the forward was for fewer yen per dollar than the indifference rate calculated in (A)?
3) Suppose that the spot exchange rate S(¥/€) between the yen and the euro is currently...
3) Suppose that the spot exchange rate S(¥/€) between the yen and the euro is currently ¥110/€, the 1-year euro interest rate is 6% p.a., and the 1-year yen interest rate is 3% p.a. Which of the following statements is MOST likely to be true? A. The high interest rate currency must sell at a forward premium when priced in the low interest rate currency to prevent covered interest arbitrage Page 3 of 13 B. Real interest parity does not...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT