Yen Bank Wishes to Invest in Yen Loans at a Rate

Multiple Choice

Yen Bank wishes to invest in Yen loans at a rate of 10 percent.The bank will fund the loans in the domestic CD market at a rate of 6.3 percent.This on-balance-sheet FX risk will be hedged in the spot market at a forward rate of $0.62/×.The spot rate on yen is $0.60/×. What must be the spot exchange rate to eliminate the preference for the yen loans if the forward rate remains $0.62/×?

A) $0.6416/×.
B) $0.5798/×.
C) $0.6118/×.
D) $0.5991/×.
E) Insufficient information.