What should the yen rate be for interest parity theory

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Reference no: EM131590166

We know that the yen and the swiss franc have a 100yen/ sf 1 exchange rate, meaning one swiss franc buys 100 yen in the spot ER market. The 1 year forward rate is 96 yen /swiss franc , or 1 franc buys 96 yen in the forward market. If the swiss franc has an interest rate of .09, what should the yen rate be for IPT (interest parity theory) to be attained? If the yen rate were 4%, would there be equilibrium? Show both amounts and differentials.

Reference no: EM131590166

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