Kamada: UIA Japan (B). Takeshi Kamada, Credit Suisse (Tokyo), observes that the */S spot rate has been holding steady, and that both dollar and yen interest rates have remained relatively fixed over the past week. Takeshi wonders if he should try an uncovered interest arbitrage (UIA) and thereby save the cost of forward cover. Many of Takeshi's research associates and their computer models-are predicting the spot rate to remain close to 118.00/$ for the coming 180 days. Using the data below, analyze the UIA potential. Arbitrage funds available Spot rate (/S) 180-day forward rate (*/$) Expected spot rate in 180 days (*/S) U.S. dollar annual interest rate Japanese yen annual interest rate $ 5,000,000 118.54 117.76 118.00 4.796 % 3.404 % CITS The UIA profit potential is%, which tells Takeshi Kamada that he should borrow to three decimal places and select from the drop-down menus.) If his expectations about the future spot rate, the one in effect in 180 days, prove correct. Takeshi Kamada generates an uncovered interest arbitrage (UIA) profit of Y. (Round to two decimal places.) and invest in the yielding currency, the to potentially gain on an uncovered basis (UIA). (Round
Kamada: UIA Japan (B). Takeshi Kamada, Credit Suisse (Tokyo), observes that the */S spot rate has been holding steady, and that both dollar and yen interest rates have remained relatively fixed over the past week. Takeshi wonders if he should try an uncovered interest arbitrage (UIA) and thereby save the cost of forward cover. Many of Takeshi's research associates and their computer models-are predicting the spot rate to remain close to 118.00/$ for the coming 180 days. Using the data below, analyze the UIA potential. Arbitrage funds available Spot rate (/S) 180-day forward rate (*/$) Expected spot rate in 180 days (*/S) U.S. dollar annual interest rate Japanese yen annual interest rate $ 5,000,000 118.54 117.76 118.00 4.796 % 3.404 % CITS The UIA profit potential is%, which tells Takeshi Kamada that he should borrow to three decimal places and select from the drop-down menus.) If his expectations about the future spot rate, the one in effect in 180 days, prove correct. Takeshi Kamada generates an uncovered interest arbitrage (UIA) profit of Y. (Round to two decimal places.) and invest in the yielding currency, the to potentially gain on an uncovered basis (UIA). (Round
Chapter7: International Arbitrage And Interest Rate Parity
Section: Chapter Questions
Problem 3SBD
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Business/Professional Ethics Directors/Executives…
Accounting
ISBN:
9781337485913
Author:
BROOKS
Publisher:
Cengage
Business/Professional Ethics Directors/Executives…
Accounting
ISBN:
9781337485913
Author:
BROOKS
Publisher:
Cengage