solve for a and b Covered Interest Arbotrage Rina works for...
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solve for a and b 
Covered Interest Arbotrage Rina works for Sumitomo Bank in Tokyo. She sees that the JPY/USD forward rate will strengthen from 130 to 100 after 180 days. Can she benefit from CIA as a yen carry trade? She has $1 million or the yen equivalent to invest today. Spot rate today is JPY 130/1 USD USD interest rate is 4.5% per annum JPY interest rate is 0.1% Forward rate is JPY 100/1 USD A. Where should she borrow and where should she invest? B. Show the rectangle approach with PV and FV for USD and JPY. What is the expected profit or loss
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