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

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

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