In Japan,90-Day Securities Have a 4% Annualized Return and 180-Day

question 17

Multiple Choice

In Japan,90-day securities have a 4% annualized return and 180-day securities have a 5% annualized return.In the United States,90-day securities have a 4% annualized return and 180-day securities have an annualized return of 4.5%.All securities are of equal risk,and Japanese securities are denominated in terms of the Japanese yen.Assuming that interest rate parity holds in all markets,which of the following statements is most CORRECT?

• A) The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the 90-day forward market.
• B) The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the 180-day forward market.
• C) The yen-dollar exchange rate in the 90-day forward market equals the yen-dollar exchange rate in the 180-day forward market.
• D) The yen-dollar exchange rate in the 180-day forward market equals the yen-dollar exchange rate in the 90-day spot market.
• E) The relationship between spot and forward interest rates cannot be inferred.

---

Definitions:

Behavioral Validation

The process of confirming that the behaviors observed truly represent the phenomenon being studied or intended to measure.

Anxiety

An emotion characterized by apprehension, anxiety, or fretfulness, often experienced in anticipation of an upcoming event whose result is not yet known.

Internal Consistency

The degree to which an assessment measures a single concept or construct reliably across multiple items or questions.

Test Retest Reliability

A measure of consistency where the same test is administered to the same group at two different points in time to assess the stability of the results.