Sam has put aside C$5,000 for his travel to Japan in a year from now.He could invest the money in Canada and earn 4.5%, and then convert it to Japanese yen when he leaves.Alternatively, Sam could convert the funds to Japanese yen (JY)and earn a 4.85% return on a Japanese investment today.Which approach should he take if the currency spot rate is C$/JY=0.008872 and the one-year forward rate is 0.008738?

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The Answer of Sam has put aside C$5,000 for his travel to Japan in a year from now.He could invest the money in Canada and earn 4.5%, and then convert it to Japanese yen when he leaves.Alternatively, Sam could convert the funds to Japanese yen (JY)and earn a 4.85% return on a Japanese investment today.Which approach should he take if the currency spot rate is C$/JY=0.008872 and the one-year forward rate is 0.008738?

Sam Has Put Aside C$5,000 for His Travel to Japan