Jack Ma, a foreign exchange trader in Canada, has CAD. 4,000,000 for short-term money market investment and wants to make a profit based on the following rates. Explain specific steps that Jack Ma must take to make a covered interest arbitrage. CAD= Canadian Dollar JYP= Japanese Yen 6-month Canadian interest rate 1.6% per annum 6-month Yen interest rate 2.95% per annum Spot rate JYP 93.1395/CAD 6-month forward rate JYP 93.8380/CAD
Jack Ma, a foreign exchange trader in Canada, has CAD. 4,000,000 for short-term money market investment and wants to make a profit based on the following rates. Explain specific steps that Jack Ma must take to make a covered interest arbitrage. CAD= Canadian Dollar JYP= Japanese Yen 6-month Canadian interest rate 1.6% per annum 6-month Yen interest rate 2.95% per annum Spot rate JYP 93.1395/CAD 6-month forward rate JYP 93.8380/CAD
ChapterP2: Part 2: Exchange Rate Behavior
Section: Chapter Questions
Problem 1Q
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Jack Ma, a foreign exchange trader in Canada, has CAD. 4,000,000 for short-term
CAD= Canadian Dollar
JYP= Japanese Yen
6-month Canadian interest rate |
1.6% per annum |
6-month Yen interest rate |
2.95% per annum |
Spot rate |
JYP 93.1395/CAD |
6-month forward rate |
JYP 93.8380/CAD |
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