Question
One-year rate in Japan is 4% and one-year rate in the U.S. is 2%. The current exchange rate is 110 yen per dollar. If you
One-year rate in Japan is 4% and one-year rate in the U.S. is 2%. The current exchange rate is 110 yen per dollar. If you can enter into a forward exchange rate of 120 yen per dollar, what would be your arbitrage profit per 100 units of the borrowed currency? Assume that you can borrow and lend at the given interest rates.
| A. | 2.00 | |
| B. | 7.27 | |
| C. | $9.84 | |
| D. | $2.00 | |
| E. | 1.66 | |
| F. | 9.84 | |
| G. | $1.66 | |
| H. | $7.27 | |
| I. | $11.45 | |
| J. | 11.45 |
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International financial management
Authors: Jeff Madura
9th Edition
978-0324593495, 324568207, 324568193, 032459349X, 9780324568202, 9780324568196, 978-0324593471
