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September 2, 2014

Homework Help: Finance

Posted by Anonymous on Wednesday, June 18, 2014 at 7:41pm.

1. (Covered Interest Arbitrage) Harry Norman, a foreign exchange trader at UBSís office in Tokyo has $2,000,000 or its yen equivalent to invest. He faces the following exchange rates and interest rates. Show how can he profit from the covered interest arbitrage? Spot rate (•/$) 112.20 180-day forward rate (•/$) 180-day U.S. dollar interest rate 180-day Japanese yen interest rate 109.80 4.00% 2.00%

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