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    Yen assets

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    This question regards international finance specifically the asset market model and exchange rates.

    Assume the spot exchange rate between dollars and yen is e=$1/100yen. The interest rate on a 180 day dollar denominated assets is i($)=1% and the interest rate on comparable 180 day yen denominated assets is also i(yen)= 1%. The 180 day forward exchange rate between dollars and yen if e(forward)=$1/90 yen.

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    Solution Preview

    The yen is appreciating against dollar. Given the interest rate and fowrad rate combination, one can gain from investing in Yen assets. Thus change the potfolio to gain from yen.
    Example: If you have $100. Right now you have invested in US ...

    Solution Summary

    Yen assets are studied.