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QUESTION
(5 pts total). Suppose the spot rate is Yen 90/$, the three-month forward rate Yen 88/$ and the three-month yen interest rate 2. (Show your...
Q2. (5 pts total).Suppose the spot rate is Yen 90/$, the three-month forward rate Yen 88/$ and the three-month yen interest rate 2.5%. (Show your calculations!)
a) (5 pts).What is the implied three-month US$ interest rate?
b)5 pts).Suppose the actual three-month US$ interest rate is 10%. What would you do to profit from the arbitrage opportunity?
