solution

The spot exchange rate is ¥128.52/€, the euro 90-day interest rate is 4%, the yen 90-day interest rate is 2% and the 90-day forward exchange rate is ¥127.95/€. Other models suggest that the 90-day forward spot will be ¥126.20/€. How much profit in euros does using €10,000,000 in a covered interest arbitrage between euros and Japanese yen produce? (No currency labels or commas are necessary, round answer to two decimal places)

2. If a Big Mac costs $4.99 in the United States and 32.54 yuan in China, what is the estimated exchange rate of yuan per dollar as implied by the Big Mac prices? (No currency labels are necessary, round answer to two decimal places)

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