Gladys Smith has saved up $2,000 for investing purposes.She sees that the CD rate in Japan is 6% for the coming year and only 4% in the United States.She also sees that the current indirect exchange rate is 110 yen per dollar.Looking at the forward rates,Gladys sees that the one-year forward indirect rate is 115 yen per dollar.Can she exploit this situation to her gain? Explain.

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The Answer of Gladys Smith has saved up $2,000 for investing purposes.She sees that the CD rate in Japan is 6% for the coming year and only 4% in the United States.She also sees that the current indirect exchange rate is 110 yen per dollar.Looking at the forward rates,Gladys sees that the one-year forward indirect rate is 115 yen per dollar.Can she exploit this situation to her gain? Explain.

Gladys Smith Has Saved Up $2,000 for Investing Purposes