b) In a daily meeting, the Chief Financial Officer (CFO) gave Ari the following table of market rates Spot exchange rate: Yen 106/$ U.S. dollar interest rate per 10% annum Japanese Yen interest rate per 6% annum and told Ari that the company's financial analyst expected the Japanese Yen to depreciate against the U.S. dollar by 3.46% in 90 days. Assume there are 360 days in a year, and all interest rates are simple interest rates. If the financial analyst's prediction about the US dollar and Japanese Yen turned out to be true: b.1) What would the spot exchange rate (Yen/$) be in 90 days? in l b.2) Would Ari make a profit by borrowing 1 million US dollar and investing in the money markets? If yes, how much profit would Ari realize in 90 days? If no, explain why.
b) In a daily meeting, the Chief Financial Officer (CFO) gave Ari the following table of market rates Spot exchange rate: Yen 106/$ U.S. dollar interest rate per 10% annum Japanese Yen interest rate per 6% annum and told Ari that the company's financial analyst expected the Japanese Yen to depreciate against the U.S. dollar by 3.46% in 90 days. Assume there are 360 days in a year, and all interest rates are simple interest rates. If the financial analyst's prediction about the US dollar and Japanese Yen turned out to be true: b.1) What would the spot exchange rate (Yen/$) be in 90 days? in l b.2) Would Ari make a profit by borrowing 1 million US dollar and investing in the money markets? If yes, how much profit would Ari realize in 90 days? If no, explain why.
Chapter20: Short-term Financing
Section: Chapter Questions
Problem 3IEE
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