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What is the interest rate on your synthetic loan

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Reference no: EM131993563

You are given the following data regarding Chinese and American foreign exchange and money market rates: the spot exchange rate is $1 = ¥6.24, the 1-year forward exchange rate is $1 = ¥6.32, and the p.a. interest rate in the U.S. is 5%. Assuming that there are no transaction costs, how could you synthetically borrow ¥100,000? What is the interest rate on your synthetic loan?

Reference no: EM131993563

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