Derive an equation for uncovered interest parity (UIP) in an environment where there are fees associated with foreign exchange transactions causing the currency broker to take 1% of the transaction as a fee each time a currency trade is made. Focus on the dollar yen exchange rate, E$/¥ and do not use the approximation of the UIP.
a) Let i$ and i¥ represent the interest rates in dollars and yen, respectively.
b) Let E$/¥ represent the current exchange rate between dollars and yen.
c) Let π$ and π¥ represent the expected inflation rates in dollars and yen, respectively.
d) The uncovered interest parity (UIP) equation in this environment is:

i$ - i¥ = (E$/¥ / E$_e$/¥) - (π$ - π¥) - 1