Here is the answer for the question – Suppose that three-month interest rates (annualized) in Japan and the U.S. are 7% and 9%, respectively. If the spot rate is 142.000/. You’ll find the correct answer below
Suppose that three-month interest rates (annualized) in Japan and the U.S. are 7% and 9%, respectively. If the spot rate is 142.000/$ and the 90-day forward rate is 142.698/$1, then there is an arbitrage opportunity.
a. True
b. False
The Correct Answer is
a. True
Reason Explained
a. True is correct for Suppose that three-month interest rates (annualized) in Japan and the U.S. are 7% and 9%, respectively. If the spot rate is 142.000/
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