The following data are? given: Et? = yen105 ?= $1

Economics Dec 16, 2020

The following data are? given: Et? = yen105 ?= $1.00 Et?+1? = yen120 ?= $1.00 ?(one year? later) iJapan? = 12?% annually iU.S.? = 15?% annually Calculate the future value of? $1,000 in one year invested in the United States and Japan. If invested in the United?States, the future value is ?$___

Please show how to solve. Thanks!

Expert Solution

If Invested in United States FV = 1000(1+i) = 1000*1.15 = $1150

If Invested in Japan initially Exchange rate is 105

Therefore $1000 = 105000 Yen

After 1 year

105,000(1+I) = 105000*1.12 = 117600

According to current interest rate

117600 yen = 117600/120 = $980

Therefore future value if invested in Japan = $980

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