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    Calculating the forward rate between two currencies

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    The Current Exchange Rate between Japan and U.K. is One British Pound Equals 150 Japanese Yen. The one year Annual Interest Rate in Japan is 1%, while the Annual Interest Rate in U.K. is 4%.

    Given this, what would you expect the Forward Rate to be between Japanese Yen and British Pounds, one year from now?

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    https://brainmass.com/business/finance/calculating-the-forward-rate-between-two-currencies-496095

    Solution Preview

    Spot rate of one British Pound=150 Japanese Yen
    Annual Interest rate in Japan=1%
    Annual Interest rate in UK=4%

    Forward Rate = Spot Rate*(1 + Interest Rate of Japan)/(1 + Interest Rate of UK)
    =150*(1+1%)/(1+4%)
    ...

    Solution Summary

    Solution describes the steps to calculate the forward rate between the two given currencies, one year from now.

    $2.19

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