Lee Junho who is a currency trader in Japan observers the following market conditions: • Annual interest rate in Japan: 1.5% per annum • Annual interest rate in France: 7.0% per annum • Current spot exchange rate: ¥ 114.4733/€ • One-year forward exchange rate: ¥ 110.2423/€ • No transaction costs If Lee Junho can borrow ¥100,000,000, specific the transactions he may carry out in order to make some arbitrage profit and calculate the amount of the profit

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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Lee Junho who is a currency trader in Japan observers the following market
conditions:
• Annual interest rate in Japan: 1.5% per annum
• Annual interest rate in France: 7.0% per annum
• Current spot exchange rate: ¥ 114.4733/€
• One-year forward exchange rate: ¥ 110.2423/€
• No transaction costs

If Lee Junho can borrow ¥100,000,000, specific the transactions he may carry
out in order to make some arbitrage profit and calculate the amount of the
profit

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