88 + F1 ) Q 1: View Assessment $3 N o 2 I W b F2 A <<< S 3 W ..... COME #M 3 X A Assignment #2: CH5 option command O b H E 66 4 ... 3 Akira Numata, a foreign exchange trader at Credit Suisse (Tokyo), is exploring covered interest arbitrage possibilities. He wants to invest $5,000,000 or its yen equivalent, in a covered interest arbitrage between U.S. dollars and Japanese yen. He faced the following exchange rate and interest rate quotes: Assumptions Arbitrage funds available Spot rate (Y/S) 180-day forward rate (V/S) Expected spot rate in 180 days (Y/$) 180-day U.S. dollar interest rate 180-day Japanese yen interest rate 20 F3 a. Identify if there is an arbitrage opportunity? b. Use the rule of thumb to find out where to start whether in dollars or yen, and then work out the covered interest arbitrage strategy? 4 E D S 4 a F4 R F Cis ci d % .... 6:" J. 0 F5 5 0 6 T ... 9 9 G u V s J ubt.bla