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1. What is the quoted currency? 2. What does one learn from the data in column I about the JPY vs. the USD over thistime period? 3. In column K, Compute an estimate of the real 90 Day Euro Yen Rate. In column L,Compute an estimate of the real 90 Day Euro Dollar Rate. In column M, compute thedifference in these real rate estimates (Japan minus US). Describe what you learn fromthese data, and what they imply for the borrowing program at BID. 4. Discuss the relationship between inflation and interest rates in each currency. 5. In column N, compute the natural logarithm of the spot exchange rate. In column O,compute the natural logarithm of the 3 month forward exchange rate. In Column P,compute the difference between the natural logarithm of the 3 month forward exchangerate and the natural logarithm of the realized spot exchange rateln(Et+3), whereEt+3refers to the spot rate 3 months ahead. What do you learn from these data? 6. In column Q, compute the difference between the 3 month nominal interest rates in Japanand the US (Japan minus US). In column R, compute the difference between column Q,and the quarterly forward premium in column I. This is (RJP Y−RUSD)−ln(F/E). Whatdo you learn from these data? 7. In column S, compute the difference between (Japanese quarterly inflation−US quarterlyinflation) and (ln(Et+3)−ln(Et)). What do you learn from these data? 8. Compute the following: 3 month JPY interest rate−3 month dollar interest rate +ln(Et)−ln(Et+3). This is equivalent to (RJP Y−RUSD)−ln(Et+3/Et). What do you learn fromthese data? 9. How should BID analyze its effective borrowing costs? Under what circumstances shouldBID expect to prefer borrowing in one currency rather than the other? If it were issuinga note (i.e., borrowing a currency) now (at the end of the data update), what would yourecommend it to do?
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