Exchange rate in the future

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A Japanese investor can earn a 3 percent annual interest rate in Japan or about 5.5 percent per year in the United States. If the spot exchange rate is 0.5 dollar per yen and the exchange rate in the future is expected to be 0.7 dollar per yen, is it profitable to borrow money in Japan and invest in USA? Please show your work.

Reference no: EM133085497

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