How can matsubara-san make a profit through covered

Assignment Help Financial Management

Reference no: EM132031582

Tomoko Matsubara is a currency arbitrager for Showa and company, Yokohama. The spot rate this morning is 120.50 Yen/$, and early indications are that 90-day interest rates in the United States will rise from their current level of 4.125%.

The U.S. Federal Reserve Bank, the central bank, is worried about rising inflation and has been publicly considering raising interest rates 25 basis points (1/4%).

The 90-day forward exchange rate quoted to Matsubara-san by local banks such as Daichi Kangyo are all about the same, 119.60 Yen/$. The current 90-day Yen interest rate is 0.5000% (half of one percent). Matsubara-san has 300 million Yen at her disposal.

a. How can Matsubara-san make a profit through covered interest arbitrage? How much in yen can she hope to make in profit in 90 days?

b. What should Matsubara-san do with her 300 million yen if she wished to speculate through uncovered interest arbitrage? What could she expect to make in profit with this strategy?

Reference no: EM132031582

Questions Cloud

Bomb calorimeter with a heat reaction raining : How do you calculate the heat released when 0.0100 mole sample of butane is burnt in bomb calorimeter with a heat reaction raining the temperature

Density of nacl solution : How do you calculate enthalpy neutralization when you are given a situation where a coffee cup calorimeter, 50.0 ml of 1.00M NaOH and 50.0 ml of 1.00M

According to the information given what is the npv : Tooth Tortures is considering building a new office after the first was destroyed by a storm.

What is the amount of investment expense deduction for year : Assuming that their marginal tax rate is 30%, what is the amount of investment expense deduction for the year

How can matsubara-san make a profit through covered : How can Matsubara-san make a profit through covered interest arbitrage? How much in yen can she hope to make in profit in 90 days?

Mol of helium occupy under the sameconditions : If 0.110 mol of helium gas occupies avolume of 2.31 L at a certaintemperature and pressure, what volume would 0.329 mol of helium occupy under the samecondition

How procurement process have an impact on accounting : Describe the relation between procurement process and accounting process and how they are integrated.

What is thechange in internal energy for the system : As a result, the piston moves against a constant externalpressure such that P ?V = 5.070 kJ. What is thechange in internal energy for the system?

What is the molar solubility of silver carbonate : a. What is the molar solubility of silver carbonate, Ag2CO3? b. What is the solubility product constant, Ksp, forsilver carbonate, Ag2CO3?

User Account

All Pages