QUESTION

23. Currently, a U.S. trader notes that in the 6-month forward market, the Japanese yen is selling at a premium (that

Category: Business
Subject: Finance
Due Date: 01/27/2016
Question Asked: 2016-01-27 19:24:38

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23. Currently, a U.S. trader notes that in the 6-month forward market, the Japanese yen is selling

at a premium (that is, you receive more dollars per yen in the forward market than you do in the

spot market), while the British pound is selling at a discount. Which of the following statements

is CORRECT?

A) If interest rate parity holds, 6-month interest rates should be the same in the U.S., Britain,

and Japan.

B) If interest rate parity holds among the three countries, Japan should have the highest 6-

month interest rates and Britain should have the lowest rates.

C) If interest rate parity holds among the three countries, the United States should have the

highest 6-month interest rates and Britain should have the lowest rates.

D) If interest rate parity holds among the three countries, the United States should have the

highest 6-month interest rates and Japan should have the lowest rates.

E) If interest rate parity holds among the three countries, Britain should have the highest 6-

month interest rates and Japan should have the lowest rates.

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23. Currently, a U.S. trader notes that in the 6-month forward market, the Japanese yen is selling at a premium (that

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... three countries, the United States should have the highest 6-month interest rates and Britain should have the lowest rates.D) If interest rate parity holds among the three countries, the United States should ha...

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