Suppose that the spot exchange rate for Japanese yen is ¥122/$ and that the one-year forward exchange rate for Japanese yen is ¥130/$. The one-year interest rate in the United States is 5%. Assuming IRP holds, what is the interest rate in Japan? (HINT: Use the formal equation for IRP.)
a. 1.67%
b. 3.28%
c. 6.56%
d. 11.89%