Question
1. Suppose the 90 day interest rates (Annualized) in Japan and the US are 2% and 4% respectively. If the spot rate is Y100/ $1
1. Suppose the 90 day interest rates (Annualized) in Japan and the US are 2% and 4% respectively. If the spot rate is Y100/ $1 and a 90-day forward rate is Y96/$1.
a. Where would you borrow and where would you invest?
b. What arbitrage opportunities would exit under these conditions, and what would be your profits for a million dollar or million dollar equivalent borrowed?
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Port Infrastructure Finance
Authors: Hilde Meersman, Eddy Van De Voorde, Thierry Vanelslander
1st Edition
