Q4 (forward pricing, continuous dividend, currencies) Suppose the current exchange rate between Euros and Japanese yen is 0.02(0.02 euro = I yen). The euro-denominated annual continuously compounded risk-free rate is 4% and the yen-denominated annual continuously compounded risk-free rate is 1%. (a) What is the 6-month euro/yen forward price (i.e. the number of euros per yen)? (b) What is the 6-month yen/euro forward price? (c) Suppose the 6-month yen/euro forward price is 48. Explain precisely the transactions you could use (being careful about the currency of denomination) to arbitrage with zero initial investment. How much do you make per yen? Q4 (forward pricing, continuous dividend, currencies) Suppose the current exchange rate between Euros and Japanese yen is 0.02(0.02 euro = I yen). The euro-denominated annual continuously compounded risk-free rate is 4% and the yen-denominated annual continuously compounded risk-free rate is 1%. (a) What is the 6-month euro/yen forward price (i.e. the number of euros per yen)? (b) What is the 6-month yen/euro forward price? (c) Suppose the 6-month yen/euro forward price is 48. Explain precisely the transactions you could use (being careful about the currency of denomination) to arbitrage with zero initial investment. How much do you make per yen