Suppose That the Risk-Free Rates in the United States and in Japan

question 11

Multiple Choice

Suppose that the risk-free rates in the United States and in Japan are 5.25% and 4.5%, respectively. The spot exchange rate between the dollar and the yen is $0.008828/yen. What should the futures price of the yen for a one-year contract be to prevent arbitrage opportunities, ignoring transactions costs?

• A) $0.009999/yen
• B) $0.009981/yen
• C) $0.008981/yen
• D) $0.008891/yen

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Definitions:

Dismantling Strategy

An approach in research or therapy that involves breaking down a complex intervention into its components to understand its effectiveness.

Additive Strategy

In problem-solving, an approach where solutions are built by sequentially adding components that contribute toward a solution.

Moderation Design

A research approach that examines whether the relationship between two variables changes across levels of a third variable.

Relative Effectiveness

A comparison measure of the impact of different interventions or treatments, assessing which is more effective under certain conditions.