The 90-Day Risk-Free Rate in the U

question 17

Essay

The 90-day risk-free rate in the U.S. is 3%. The spot exchange rate between the U.S. and Japan is 1 dollar for 133 yen. The 90-day forward exchange rate is 1 dollar for 135 yen. What is the Japanese 90-day risk-free rate?

---

Definitions:

Identical Costs

Refers to costs that are the same across different products, services, or processes.

X-Inefficiency

A situation in which a firm fails to utilize its resources efficiently because of a lack of competitive pressure.

Average Total Costs

The total cost of production divided by the quantity produced, representing the per-unit cost of producing a good or service.