What are the profits of this currency trading strategy

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Reference no: EM131963684

1. John and Jen will receive $50,000 from their trust fund in 8.75 years. Their discount rate is 3 percent per quarter (note there are 3 months in one quarter). How much would they be willing to sell the trust fund for today?

2. Consider the yen carry trade example done in lecture. Specifically, use the same current exchange rate and given USD and JPY interest rates, and assume a short position of ¥100,000,000 to fund a long position in dollars. What are the profits (in dollars) of this currency trading strategy if one year from now the exchange rate is ¥80.00/$?

Reference no: EM131963684

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