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In order to determine if Interest Rate Parity (IRP) exists between the U.
In order to determine if Interest Rate Parity (IRP) exists between the U.S. and Japan NOW, you will need to compare the current size of the forward-spot differential, to the size of the current interest rate differential between the U.S. and Japan, as shown in the examples we covered in the Chapter 7 lecture video.
Use the IRP equation to compare the two differentials mentioned above (that is, show the IRP equation using your data and explain what your results mean). According to interest rate parity, a foreign currency with a higher interest rate should have a discount in its futures price. Does that relationship exist here?
