Alumina Limited of Australia has called Mitsubishi UFJ Financial Group to get its opinion about the Japanese yen–Australian dollar exchange rate
The current rate is ¥67.72/A$, and Mitsubishi thinks the Australian dollar will weaken by 5% over the next year. What is Mitsubishi UFJ's forecast of the future exchange rate?
If the Australian dollar weakens by 5% over the next year, it will take 5% fewer Japanese yen to purchase the Australian dollar. Thus, the forecast is
¥67.72/A$ (1 – 0.05) = ¥64.334/A$
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