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Express the profit amount

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Reference no: EM133111036

The risk-free rate in the US is 1%, whereas the risk-free rate in Japan is 2%. The spot exchange rate is 110 yen/$ and the 3-month forward exchange rate is also 110 yen/$. What would be your profit today if you could borrow either $1M or its equivalent in yen and use a covered interest arbitrage strategy? Please, express the profit amount in the currency in which you will borrow the initial amount.

Reference no: EM133111036

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