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Determine interest rate parity holds

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Reference no: EM132953419

The following information was available: spot rate for Japanese Yen: $0.009618; 1,460-day forward rate for Japanese Yen: $0.013560 (assume a 365 day year); U.S. risk-free rate: 2.00 percent; Japanese risk-free rate: 1.50 percent. Assuming annual compounding, determine whether interest rate parity holds and, if not, suggest an arbitrage strategy.

Reference no: EM132953419

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