Calculate interest rate parity-purchasing power parity

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Reference no: EM131998190

Heidi Jensen is attempting to determine whether US/Japanese financial conditions are at parity. The current spot rate is a flat ¥89.00/$, while the 360-day forward rate is ¥84.90/$. Forecast inflation is 1.100% for Japan, and 5.900% for the US. The 360-day yen deposit rate is 4.700%, and the 360-day dollar deposit rate is 9.500%.

Calculate whether interest rate parity, purchasing power parity, and international fisher effect conditions hold between Japan and the US.

Find the forecasted change in the Japanese yen/US dollar exchange rate one year from now.

Reference no: EM131998190

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