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

question 2

Multiple Choice

In Japan,90-day securities have a 4% annualized return and 180-day securities have a 5% annualized return.In Canada,90-day securities have a 4% annualized return and 180-day securities have a 4.5% annualized return.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 statement about the exchange rate is true?

• 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.

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