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The annual yield on government-issued bonds in Japanese Yen is 5%. The analyst say that...

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Accounting

The annual yield on government-issued bonds in Japanese Yen is 5%. The analyst say that Yen will depreciate by 2% in the following year. If the Fisher Effect holds, what should be the yield on the one-year US T-Bills?
According to the Fisher Effect, the relation between exchange rate and interest rates should be as follows.
ef=1+ih1+if-1
where ef is the price of foreign currency in the units of local currency, ih is local interest rate, and if is foreign interest rate.
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