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

question 30

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 180-day forward market.
• B) The yen-dollar exchange rate in the 90-day forward market equals the yen-dollar exchange rate in the 180-day forward market.
• C) The spot rate equals the 90-day forward rate.
• D) The spot rate equals the 180-day forward rate.
• E) The yen-dollar spot exchange rate equals the yen-dollar exchange rate in the 90-day forward market.

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Definitions:

Cultural Capital

Non-financial social assets such as education, intellect, style of speech, dress, or physical appearance that promote social mobility beyond economic means.

Socioeconomic Class

A division of a society based on social and economic status, often categorizing people by income, education, and occupation.

Parents

Caregivers of offspring in their own species; in humans, this usually refers to the father and mother of a child.

Digital Divide

The gap between individuals who have access to modern information and communication technology and those who do not, affecting opportunities in education, employment, and social engagement.