Suppose the Spot and Three-Month Forward Rates for the Yen

question 50

Multiple Choice

Suppose the spot and three-month forward rates for the yen are ¥128.79 and ¥135.22,respectively.What is the approximate annual percent difference between the inflation rate in the U.S.and in Japan?

• A)3.93 percent
• B)4.21 percent
• C)16.67 percent
• D)21.52 percent
• E)22.28 percent

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Definitions:

Standard Deviation

A statistical measure of the dispersion or variability of a set of data points, often used in finance to quantify the risk associated with a specific investment.

Risk-free Rate

The rate of return of an investment with no risk of financial loss, typically represented by the yield on government bonds.

Complete Portfolio

A diversified investment portfolio that contains a mix of assets in varying proportions, tailored to an investor's financial goals, risk tolerance, and investment horizon.

After-inflation, After-tax

A financial metric that reflects the real purchasing power of earnings or investment returns after accounting for inflation and taxation.