Question

Refer to Table 1 to answer the following questions: Is the Japanese yen selling at a premium or discount relative to the U.S. dollar? What is the per annum percent discount/premium for the 90-day forward yen? Your firm currently has $15 million available to invest in a 6-month Eurocurrency market deposit. Assume the exchange rates and London Eurocurrency deposit rates from Table 1 are available to you. Ignoring transaction costs, calculate the maturity value (in U.S. dollars) of deposits in either dollars or Swiss francs. Is there an advantage to depositing in the currency with the higher deposit rate? Based on the 90-day forward rates and deposit rates in Table 1, does interest rate parity appear to hold between the dollar and the Swiss franc?

TABLE 1: EXCHANGE RATES AND DEPOSIT RATES
			Eurocurrency Deposit Rates
Currency	Direct	Indirect	30-Day	90-Day	180-Day
Britain (Pound)	1.92000	0.52083	0.13375	0.12969	0.12563
30-Day Forward	1.91000	0.52356
90-Day Forward	1.89120	0.52877
180-Day Forward	1.86850	0.53519
Japan (Yen)	0.00753	132.80210	0.08500	0.08188	0.07813
30-Day Forward	0.00752	132.97870
90-Day Forward	0.00750	133.33330
180-Day Forward	0.00749	133.51130
Switzerland (Franc)	0.76420	1.30856	0.08063	0.08125	0.07938
30-Day Forward	0.76340	1.30993
90-Day Forward	0.76170	1.31285
180-Day Forward	0.75990	1.31596
U.S. Dollar			0.06563	0.06813	0.06813