Here is the answer for the question – **The five-year yen denominated interest rate is 6% per annum (compounded annually). The five year dollar interest rate is 8.5%. What is the implied forward premium or discount of the yen (over the current spot rate) for a five year forward contract?**. You’ll find the correct answer below

### The five-year yen denominated interest rate is 6% per annum (compounded annually). The five year dollar interest rate is 8.5%. What is the implied forward premium or discount of the yen (over the current spot rate) for a five year forward contract?

a. 2.72% premium

b. 18.46% discount

c. 2.47% premium

d. 12.36% premium

**The Correct Answer is**

**c. 2.47% premium**

### Reason Explained

c. 2.47% premium is correct for The five-year yen denominated interest rate is 6% per annum (compounded annually). The five year dollar interest rate is 8.5%. What is the implied forward premium or discount of the yen (over the current spot rate) for a five year forward contract?

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