Henri Jacque, an arbitrager with Bank of Montreal, faces the following Canadian dollar/U.S. dollar quotes: Henri Jacque

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Henri Jacque, an arbitrager with Bank of Montreal, faces the following Canadian dollar/U.S. dollar quotes: image text in transcribed

Henri Jacque is authorized to use C $\$ 20,000,000$ or its U.S. dollar equivalent. The ending profit, if any, should be realized in Canadian dollars. How can he complete covered interest arbitrage? What will be his profit?

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Multinational Business Finance

ISBN: 9780201635386

9th Edition

Authors: David K. Eiteman, Michael H. Moffett, Arthur I. Stonehill, Denise Clinton

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Question Posted: May 31, 2024 11:05 AM

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Henri Jacque, an arbitrager with Bank of Montreal, faces the following Canadian dollar/U.S. dollar quotes: Henri Jacque

Question:

Spot rate: Six-month forward rate: Six-month Canadian dollar interest rate (borrowing or investing): Six-month U.S. dollar interest rate (borrowing or investing) C$1.4900/$ C$1.5100/$ 7.50% p.a. 5.00% p.a.

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Multinational Business Finance

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