Use cia by borrowing gbp and investing proceeds

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Reference no: EM131975836

From an investor’s perspective, the one- year borrowing and lending rates for GBP are 4 percent and 3 percent, respectively. In contrast, the one- year borrowing and lending rates for JPY are 1.5 percent and 0.75 percent, respectively. The spot rate is GBPJPY = 160, and the one-year forward rate is GBPJPY = 158. . Assume an arbitrageur tries to use CIA by borrowing GBP and investing proceeds in JPY, is this strategy profitable? Yes No Can’t say Type: M

Reference no: EM131975836

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