The following exchange rates are available to you from 3 different banks: ...
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The following exchange rates are available to you from 3 different banks:
| Bank | Rates | |
| Citi Bank | 120/$ | 1150/$ |
| HSBC Bank | 1200/$ | 10.17/ |
| KEB Hana Bank | $0.00084/ | 0.09901/ |
Assume that you can borrow in any currency overnight at zero interest. Can you make a profit via an arbitrage operation? If not, explain why? If yes, show how. Suppose that eventually the prevailing rates are those offered by Citi Bank, given in the table above. What is the rate of Japanese yen per Korean won? If the inflation rates in the South Korea, US and Japan are expected to be 3%, 1% and 5% in the next 12 months, what exchange rates should one expect to see a year from now (precision to the 5th decimal required): I. Under the absolute PPP II. Under the relative PPP
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