1 the spot exchange rate is yen10230 the 180-day forward, Ask an Expert

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1. The spot exchange rate is ¥102.30/$, the 180-day forward exchange rate is ¥101.40/$, the 180-day dollar interest rate is 4.8% per year, and the 180-day yen interest rate is 3.4% per year. Models suggest that spot will remain close to ¥101.90/$ over the next 180 days. How much profit does investing $5,000,000 (or its yen equivalent) in a covered interest arbitrage between US dollars and Japanese yen yield?

2. The spot exchange rate is ¥102.30/$, the 180-day forward exchange rate is ¥101.40/$, the 180-day dollar interest rate is 4.8% per year, and the 180-day yen interest rate is 3.4% per year. Models suggest that spot will remain close to ¥101.90/$ over the next 180 days. How much profit does investing $5,000,000 (or its yen equivalent) in an uncovered interest arbitrage between US dollars and Japanese yen yield?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92740985

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