Suppose that the current spot price of the U.S. dollar in terms
of the Japanese yen is ¥300 = $1 and that you expect the spot
price of the dollar in terms of the yen to be ¥280 = $1 one
year from now. Suppose further that interest rates in the two
countries on what you believe to be equally risky securities are
the same. On the basis of this information you should
1. shift funds from dollars to yen and
sell yen forward.
2. shift funds from dollars to yen.
3. sell dollars forward for yen.
4. shift funds from yen to dollars and
sell dollars forward.
Choose the correct option.