The following information was available
Spot rate for Japanese yen: 0.009854 $/yen
680 day forward rate for Japanese yen: 0.010927 $/yen
(assume a 365 day year)
The US risk free rate 6.50%
The Japanese risk free rate 1.20%
a) assuming annual compounding, what is the expected 680 day forward rate.
b) Based on the value determined in part a is there an arbitrage opportunity?
c) if the answer in part b was yes, describe the arbitrage strategy. Assume you have the ability to borrow either 100
d) Total profit, including the currency of the profit