MGHC02H3 Lecture Notes - Lecture 2: Foreign Exchange Spot, Japanese Yen, Corporate Bond

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2 Apr 2022
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Example 1 e /c$ (i. e. , # of per c$) Example 2 ec$/ (i. e. , # of c$ per ) Suppose you are working for a large, international investment bank, and you observe the annual yields on the japanese yen-denominated corporate bonds and the euro-denominated corporate bonds are 2. 56% and. Calculate the arbitrage profit (measured in japanese yen). Explain in words: now, suppose the spot / exchange rate bear all the burden of adjustments. Find the spot / exchange rate that would make your boss indifferent between investing in the japanese yen-denominated corporate bonds and the euro-denominated corporate bonds.

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