You want to buy a special medicinetoy from China that can cure Coronavirus. There is a one-year wait list, and the price is fixed at RMB 1MM. The current bid-ask spot rate is 6-7 RMB/USD, and the forward rate is 7-8 RMB/USD. U.S. interest rates are 10%, and Chinese rates are 20%, for borrowing or lending.

1. What is the least amount of USD you need today to buy a risk-free medicinetoy in one year. Explain how step by step and show work

Due to a trade war, you can not buy or sell Chinese currency directly for USD. You can only borrow and lend USD at 10%, and cannot borrow or lend foreign currency. But, you may use Japanese forward contracts. The one-year bid-ask forward exchange rates are 100-110 JPY/USD, and 16-17 JPY/RMB.

2. How can you get a special medicinetoy risk-free? How many USD do you need today? Explain steps and show them.