Free money?

[King Cnvt]

If I can convince a Japanese bank to lend me £1M, the interest rate is less than 2%.

The Bank of Iceland current account pays out 14% interest.

That means I will be making £140K in interest and paying £20K in interest to the lender.

This is free money.

[pickle]

If I can convince a Japanese bank to lend me £1M, the interest rate is less than 2%.

The Bank of Iceland current account pays out 14% interest.

That means I will be making £140K in interest and paying £20K in interest to the lender.

This is free money.

Assuming the realtive exhange rates of the two currenices dont change in the meantime.

[Moscow Mule]

Sir, you should be a currency trader...

[meridian]

If I can convince a Japanese bank to lend me £1M

I think I can spot the flaw in your plan, Baldrick.

As pickle pointed out, if the Icelandic whatevers collapse against the yen then you'd have to pay back more than you'd borrowed.

Also, you haven't accounted for withholding tax taken by the Icelandic Hector.

I've thought about this from a smaller perspective and using the NZ rates (i.e. sending a wad of cash to NZ). The interest rates there are approx 11-12% and non-resident withholding tax is only 10%, but it's really the risk of exchange rate difference that will eat your capital.

The next step is to find a forex broker that doesn't charge interest, to leverage and short sell the base currency and so hedge your capital, but I think these are like rocking horse poo.

[ASB]

The next step is to find a forex broker that doesn't charge interest, to leverage and short sell the base currency and so hedge your capital, but I think these are like rocking horse poo.

I would guess you could do it easily enough with an option. At a rough guess I would expect the premium to be 12%.

[Moscow Mule]

You're better off spread betting.

[ASB]

You're better off spread betting.

Probably. As a friend once said:-

want to know how to make a small fortune in Forex......




start with a big one.


IGMC.

[King Cnvt]

You're better off spread betting.

Why?

I cannot see why this is better than borrowing at a very low rate and investing at a very high rate on money I don't even have?

[Moscow Mule]

Probably. As a friend once said:-

want to know how to make a small fortune in Forex......




start with a big one.


IGMC.

[ChimpMaster]

You obviously haven't heard of the Yen carry trade unravelling.