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a) Given are the several economic data related to the parity condition of Malaysia and Japan: Spot rate One year forward rate Annual interest

a) Given are the several economic data related to the parity condition of Malaysia and Japan: Spot rate One year forward rate Annual interest (MYR) Annual interest (JPY) MYR3.6174/JPY 100 MYR3.7500/JPY 100 10.3 percent 7.3 percent i) Justify whether interest parity is at equilibrium or disequilibrium. (3 marks) ii) Compute the profit in Japanese Yen if an arbitrager initially borrows or invests MYR60million. (7 marks)

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