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You are a hedge fund looking for arbitrage opportunities between the spot FX market and...

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Accounting

You are a hedge fund looking for arbitrage opportunities between the spot FX market and 9 month FX forwards and money markets. You observe the following quotes from market makers in these markets for JPY and USD:

bid ask
S(JPY/USD) 107.40 107.55
F9m(JPY/USD) 107.49 107.67

9m lending rate 9m borrowing rate
JPY 0.15%pa 0.25%pa
USD 0.40%pa 0.50%pa

You can borrow a present value of up to USD 1 million or lend a face value of up to USD 1 million by borrowing in JPY. At these prices, you can make a certain JPY profit in 9 months' time (to the nearest hundred JPY) of:

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