You have seen the large difference in the yield of the 10 year government bonds in...

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You have seen the large difference in the yield of the 10 year government bonds in the Philippine and Japan 10 Year Government Bond Japan 0.022% per annum / Philippines 2.800% per annum You want take advantage of this situation. At the same time, you want to be certain that you will be able to convert your PHP back to JPY after three months. You review the spot rates and 1 month forward rates for JPY vs PHP Spot Rate JPY 1.00 PHP 0.4658 = 1 month forward JPY 1.00 PHP 0.403 You borrow JPY100,000.00. The cost of borrowing JPY for three months is 0.10% per annum. A. Under these market conditions would you invest in the Philippine 10 year bond? B What is the calculated gain or loss on the transaction? C. Show the foreign currency exchange process and how you calculated the gain or loss. You have seen the large difference in the yield of the 10 year government bonds in the Philippine and Japan 10 Year Government Bond Japan 0.022% per annum / Philippines 2.800% per annum You want take advantage of this situation. At the same time, you want to be certain that you will be able to convert your PHP back to JPY after three months. You review the spot rates and 1 month forward rates for JPY vs PHP Spot Rate JPY 1.00 PHP 0.4658 = 1 month forward JPY 1.00 PHP 0.403 You borrow JPY100,000.00. The cost of borrowing JPY for three months is 0.10% per annum. A. Under these market conditions would you invest in the Philippine 10 year bond? B What is the calculated gain or loss on the transaction? C. Show the foreign currency exchange process and how you calculated the gain or loss.

Answer rating: 100% (QA)

A Based on the given information it appears to be an opportunity to invest in the Philippine 10year ... View the full answer