Describe the arbitrage strategy

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Reference no: EM131971931

The following information was available

Spot rate for Japanese yen: 0.009854 $/yen

680 day forward rate for Japanese yen: 0.010927 $/yen

(assume a 365 day year)

The US risk free rate 6.50%

The Japanese risk free rate 1.20%

a) assuming annual compounding, what is the expected 680 day forward rate.

b) Based on the value determined in part a is there an arbitrage opportunity?

c) if the answer in part b was yes, describe the arbitrage strategy. Assume you have the ability to borrow either 100

d) Total profit, including the currency of the profit

Reference no: EM131971931

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