International parity conditions approach Covered vs uncovered interest arbitrage The investor can always borrow 50,000 US dollars or the equivalent in any other currency. The investor believes that the yen is going to depreciate against the US dollar during the next 180 days.His expected exchange rate is S(YEN/USD)=125. 我 What is the covered interest arbitrage potential? 华 What is the uncovered interest arbitrage potential? What is the uncovered interest arbitrage profit if the spot rate turns out to be S(YEN/USD)=116 after 180 days? Assume that the US interest rate increases to 6%.Can the investor make a covered interest arbitrage profit?International parity conditions approach Covered vs uncovered interest arbitrage The investor can always borrow 50,000 US dollars or the equivalent in any other currency. The investor believes that the yen is going to depreciate against the US dollar during the next 180 days. His expected exchange rate is S(YEN/USD) = 125. What is the covered interest arbitrage potential? What is the uncovered interest arbitrage potential? What is the uncovered interest arbitrage profit if the spot rate turns out to be S(YEN/USD) = 116 after 180 days? Assume that the US interest rate increases to 6%. Can the investor make a covered interest arbitrage profit?