You can borrow up to 100mn Japanese yen over a 90 day
Question # 00371018
Posted By:
Updated on: 08/25/2016 06:05 AM Due on: 08/25/2016
You can borrow up to 100mn Japanese yen over a 90 day period at 1%pa interest and lend Japanese yen at 0%pa interest. You can borrow up to 1mn USD over a 90 day period at 3%pa interest and lend USD at 2%pa interest.
The current spot exchange rate quote between the two currencies is
102.076-102.093
The 90 day forward quote is
101.052-101.076
Identify and explain any arbitrage opportunity – or if no arbitrage opportunity exists, explain why this is the case.
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Rating:
/5
Solution: You can borrow up to 100mn Japanese yen over a 90 day