CFA Practice Question

There are 227 practice questions for this study session.

CFA Practice Question

The current spot rate between the Japanese yen and the U.S. dollar is ¥124.56/$. If the risk-free rate in Japan is 2.6% and in the U.S. it's 6.4%, what should be the 6-month forward rate?

A. ¥120.11/$
B. ¥126.85/$
C. ¥122.31/$
Correct Answer: C

F = [¥124.56/$ / (1 + 0.064)180/360] * (1 + 0.026)180/360 = ¥122.31/$

User Contributed Comments 4

User Comment
NIKKIZ How should I know when to use 360 and when to use 365 days?
aqibislam Interest rates for bonds are based on 360 days so for FRA use 360 days but for currencies and equities 365 days is used
ericczhang ...if you look at the answer to the previous basic question, they used 365 days for a USDCAD problem.

I guess the best bet is to get it approximately right?
jpowers It says 6 months, which is half a year. When working with months, use the fraction of a year. In this case 6/12 or .5 years.
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