You are given the following data regarding Chinese and American foreign exchange and money market rates: the spot exchange rate is 

$1 = ¥6.24, the 1-year forward exchange rate is $1 = ¥6.32, and the p.a. interest rate in the U.S. is 5%. 

Assuming that there are no transaction costs, how could you synthetically borrow ¥100,000? (List each transaction you would make including the amounts of each currency involved, and assume zero transaction costs. Show your work.) What is the interest rate on your synthetic loan?

Answer rating: 100% (QA)

Requi... View the full answer