Suppose the forward rate had been set equal to the spot rate. There would be an
arbitrage opportunity, if you could borrow in JPY at 0.14214% and lend in USD at
0.3819% equal to the difference between the interest rates. This strategy of
IF TUTE 3 TUTE NOTES
1) a. The IS Curve is the locus of combinations of Y and r satisfying the goods market
equilibrium condition, expenditure = income, or I+G+X = S+T+M, or I+G+B = S+T (where B =
balance of trade).
Ignoring the impact of Y on M, S depend
IF TUTE NOTES 1
1) a) The terms currency is the US Dollar, and the commodity (or quote) currency is the GB
pound. These exchange rates are the number of US dollars per GB pound, or the price of a
pound in dollars.
The bid-rate is the price the market make