Question

Compute the expected annual change in the Japanese Yen over the next 10 years based on market expectations:

a) Japan: 0.50% and coupon at 0.50
b) US: 3.97% and coupon at 3.50

Answer 1

The expected annual change in the Japanese Yen over the next 10 years based on market expectations is 0% for Japan and 0.47% for the US.

Step-by-step explanation:

The expected annual change in the Japanese Yen over the next 10 years based on market expectations can be calculated by taking the difference between the coupon rate and the market rate for both Japan and the US. According to the given information, the expected change in the Japanese Yen for Japan is 0.50% and the coupon rate is also 0.50%. For the US, the expected change is 3.97% and the coupon rate is 3.50%.

To calculate the expected annual change, we can subtract the coupon rate from the market rate. For Japan, the expected annual change would be 0.50% - 0.50% = 0%. For the US, the expected annual change would be 3.97% - 3.50% = 0.47%.

Therefore, based on market expectations, the expected annual change in the Japanese Yen over the next 10 years would be 0% for Japan and 0.47% for the US.