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A FOREX trader observes the following data: Spot rate = 100 / $ 3-month forward rate = 99 / $ U.S. interest rate = 5%
A FOREX trader observes the following data: Spot rate = 100 / $ 3-month forward rate = 99 / $ U.S. interest rate = 5% p.a. Japanese interest rate = 1% p.a. Using the data above, compute the arbitrage profit if the FOREX trader can borrow $1 million or its Yen equivalent to start the process.
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