Calculate amount of potential riskless arbitrage profits

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A foreign currency trader in Tokyo is exploring into opportunity to earn riskless profits. He can borrow and invest $5,000,000 or Yen equivalent. Use the information in the table below.

1. Describe in detail how the trader can earn riskless profits and calculate amount of potential riskless arbitrage profits that he can earn.

2. Assuming that all other things including current spot rate, dollar interest rate and yen interest rate remain unchanged, calculate 180-day forward rate (¥/$) which will not allow the trader to earn riskless profits any longer.

3.Assuming that all other things including current forward rate, dollar interest rate and yen interest rate remain unchanged, calculate current spot rate (¥/$) which will not allow the trader to earn riskless profits any longer.

Reference no: EM133113418

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