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.

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Definitions:

Deference to Authority

A social norm that encourages individuals to respect, follow, and prioritize the opinions and directives of those in positions of power.

Norm of Reciprocity

A social norm stating that if someone does something for you, you then feel obligated to return the favor.

Negotiation

A process by which two or more parties seek to reach an agreement or resolve a dispute through dialogue and compromise.

Soft Influence Tactics

Subtle or indirect methods used to persuade or guide others' behavior, relying on personal appeal and attractiveness rather than coercion.