The jpy/aud spot exchange rate is 82.42, the jpy interest rate is 0.15%, and the aud interest rate is 4.95%. if the interest rates are quoted on the basis of a 360-day year, the 90-day forward points in jpy/aud would be closest to: a. –377.0. b. –97.7. c. 98.9.

The answer is B. -97.7.

Explanation:

As the question gives us the spot rate, the interest rates of two countries, We can apply the covered interest parity to calculate the 90-day forward exchange rate JPY/AUD from which 90-day forward points can be derived.

F = S x ( 1+ Rjpy) / ( 1+ Raud); in which Rjpy denoted as JPY interest rate ( 0.15% per annum) while Raud is AUD interest rate ( 4.95% per annum).

F = 82.42 x (1+ 0.15% x 90/360) / ( 1 + 4.95% x 90/360) = 81.443

=> The 90-day forward points is : 100 x ( F-S) = 100 x ( 81.443 - 82.42) = -97.7

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