9. Bank A tries to take advantage of the interest rate differential between Japan and...
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9. Bank A tries to take advantage of the interest rate differential between Japan and UK by conducting a "carry trade." Given the following information, shows step by step the gain/loss in USS if Bank A borrows 10,000,000 yen and then invest it in UK for one year. Assumes the exchange rates remains the same over the year. Japan 0.6% UK 1.3% One-year interest rate Spot rate: $1.56/BP $0.008929/Yen 174.71 16/BP
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