Question
You wonder if you should try an uncovered interest arbitrage (UIA). Professionals predicts the spot rate to remain close to 117.00/$ for the coming 180
You wonder if you should try an uncovered interest arbitrage (UIA). Professionals predicts the spot rate to remain close to 117.00/$ for the coming 180 days. Using the following data to analyze the UIA potential. (15 points)
|
| Value | Yen Equivalent |
| Credit available | $5,000,000 | 575,000,000 |
| Spot rate (/$) | 115.00/$ |
|
| 180-day forward rate (/$) | 117.80/$ |
|
| Expected spot rate in 180 days (/$) | 117.00 | |
| 180-day U.S. dollar interest rate (P.A.) | 4.800% | |
| 180-day Japanese yen interest rate (P.A.) | 3.400% | |
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Financial Markets And Institutions
Authors: Jeff Madura
9th Edition
1439038848, 978-1439038840
