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The spot rate of exchange of Japanese yen for US dollars is currently 100 yen per dollar but the one year forward rate is 101
The spot rate of exchange of Japanese yen for US dollars is currently 100 yen per dollar but the one year forward rate is 101 yen per dollar. Determine the yield on a one year zero coupon US government security if the corresponding yield on a Japanese government security is 2%.If the yield on a one-year zero-coupon US government security was higher than what you calculated, how would you exploit this arbitrage opportunity?
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