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

question 27

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.

---

Definitions:

Long-term Direction

The strategic goals and visions set by an organization to guide its operations, development, and decision-making processes over an extended period.

Functional Strategy

A specific, detailed plan aimed at achieving objectives in a particular business area, supporting the overall business strategy.

Divisional Strategy

A strategic approach in which an organization is divided into semi-autonomous units, each focusing on a specific product line or market segment.

Corporate Strategy

The overall direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration of resources.