1.What would the spot exchange rate (Yen/$) be in 90 days? 2. Would Ari make a profit by borrowing 1 million US dollar and investing in the money markets? If yes, how much profit would Ari realize in 90 days? If no, explain why.
In a daily meeting, the Chief Financial Officer (CFO) gave Ari the following table of market rates
|
Spot exchange rate: |
Yen 106/$ |
|
U.S. dollar interest rate per annum |
10% |
|
Japanese Yen interest rate per annum |
6% |
and told Ari that the company’s financial analyst expected the Japanese Yen to
1.What would the spot exchange rate (Yen/$) be in 90 days?
2. Would Ari make a profit by borrowing 1 million US dollar and investing in the
If yes, how much profit would Ari realize in 90 days?
If no, explain why.
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