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Bonus 4. How will rates adjust to close arbitrage opportunity? a) Japanese money market rates will fall and US money market rates will rise b)

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Bonus 4. How will rates adjust to close arbitrage opportunity? a) Japanese money market rates will fall and US money market rates will rise b) USD JPY forward rate will rise c) Japanese money market rates will rise and US money market rates will fall d) USD JPY forward rate will fall The following questions are bonus worth 2.5% each. Use the information available in Bonus Question 1. Please circle the best answer to each question. Bonus 1. Ninety (90) day money market rates are 4% annualized in Japan and 1% annualized in US. Spot USD YEN is trading at 115 and the 90 day forward trades at 120. Are rates in line with Interest Rate Parity

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