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( 5 points ) Suppose the three-month forward rate for the Indian rupees (INR) per Japanese yen (JPY) was INR 0.75/JPY , while the spot
- (5 points) Suppose the three-month forward rate for the Indian rupees (INR) per Japanese yen (JPY) was INR 0.75/JPY, while the spot rate at the time was INR 0.73/JPY. A scientist located in New York speculates that the spot rate three months later will be INR 0.77/JPY. They decided to devote 500,000 yen in order to try to profit from this speculation, by making a trade in the forward market.
Describe the cash flows and the profit if the prediction comes true (Specify the amounts and currencies). [hint: the trade was made in the forward market; it was not a buy-and-hold strategy of nor ]
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