Question: Suppose that: The current spot exchange rate between the dollar and the yen is 105 yen/$. Japanese bond yields are 4% U.S. bond yields are

Suppose that:

The current spot exchange rate between the dollar and the yen is 105 yen/$.
Japanese bond yields are 4%
U.S. bond yields are 3%

Describe a carry trade strategy that would attempt to profit from this interest rate differential. You may assume that you are a hedge fund that can borrow at rates near bond yields.

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