Suppose that 3-month interest rates annualized in japan and, Ask an Expert

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Suppose that 3-month interest rates (annualized) in Japan and the United States are 7% and 9%, respectively. if the spot rate is ¥142:$1 and the 90-day forward rate is ¥139:$1,

a. where would you invest?
b. where would you borrow?
c. what arbitrage opportunity do these figures present?
d. assuming no transaction costs, what would be your arbitrage profit per dollar or dollar-equivalent borrowed?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9874020

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