Share
Explore BrainMass

Six months T-bills have a nominal rate of 7%, while default

1- Six months T-bills have a nominal rate of 7%, while default free. Japanese bonds that mature in 6 months have a nominal rate of 5.5%. In the spot exchange market 1 yen equals $0.009. If interest rate parity holds, what is the 5-month forward exchange rate?

2. A TV set costs $500 in the United States. The same costs 550 Euros in france. If purchasing power parity holds, What is the spot exchange rate between the euro and the Dollar?-

Solution Preview

Six months T-bills have a nominal rate of 7%, while default free. Japanese bonds that mature in 6 months have a nominal rate of 5.5%. In the spot exchange market 1 yen equals $0.009. If interest rate parity holds, what is the 5-month forward exchange rate?

2. A TV set costs $500 in the United States. The ...

Solution Summary

1- Six months T-bills have a nominal rate of 7%, while default free. Japanese bonds that mature in 6 months have a nominal rate of 5.5%. In the spot exchange market 1 yen equals $0.009. If interest rate parity holds, what is the 5-month forward exchange rate?

2. A TV set costs $500 in the United States. The same costs 550 Euros in france. If purchasing power parity holds, What is the spot exchange rate between the euro and the Dollar?

$2.19