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Suppose that the annual interest rate on Japanese yen is 7% and the annual interest rate on U.S. dollar is 9%, respectively. The spot rate
- Suppose that the annual interest rate on Japanese yen is 7% and the annual interest rate on U.S. dollar is 9%, respectively. The spot rate is $ 142 and the 90-day forward rate is $ 139.
- Does covered interest parity (CIP) hold? Why?
- Assume you want to invest $1,000,000. Can you make arbitrage profit? Describe your strategy (where you would borrow and where you would invest) and quantify the arbitrage profit.
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The Concepts And Practice Of Mathematical Finance
Authors: Mark S. Joshi
1st Edition
0521823552, 9780521823555
