You friend from Japan attracted by the higher interest rates in France figures she will...
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You friend from Japan attracted by the higher interest rates in France figures she will invest 3,000,000 yen in French 6 month bonds that yield 5.0% and hedge back the currency at a rate of 107.000125 Yen per Euro, rather than investing in Japan-- is this a good idea? Interest rates in Japan are 3.0% and the spot exchange rate is 1 Yen buys 0.009390 Euro's. Use 6 decimal places for the currency. a) Calculate in Yen which option is better and by how much and b) What is your % return for the holding period for each option?
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