Uncovered interest parity

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Uncovered Interest Parity

Show how the equation in uncovered interest parity is derived. Explain.

Assume the expected $/Yen exchange rate is 0.01 dollars per yen. Further assume that the US interest rate is 8% and the Japanese interest rate is 3%. According to uncovered interest parity, what would be the current $/Yen exchange rate? Show work.

Reference no: EM131393504

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