For the sake of speed and clarity, I am not going to write the whole answers out here. Rahter I am going to refer the relevant sections of the text that I feel explain the points particularly clearly. I realize that the terms 'appreciation' and 'depreciation' can be confusing. While credit is given for all correct answers, you can maximize your performance on the exam by addressing the first-order issues in the problem and explaining them carefully rather than by delving into a complicated but creative answer. This will save you time.
Complicated answers are much harder to get exactly right.
I suppose the trick is to include just the right amount of information. State explicitly any additional assumptions necessary to back up your answers. Please read the text, page 176 for this question. As the current exchange rate increases, the expected appreciation of the yen increases, and so will your return. Please see the table on p173 of the text.