Question
1. A currency dealer has good credit and can borrow either $1,000,000 or 800,000 for one year. The one-year interest rate in the U.S. is
1. A currency dealer has good credit and can borrow either $1,000,000 or
800,000 for one year. The one-year interest rate in the U.S. is $= 3% and in
the euro zone the one-year interest rate is = 5%. The one-year forward exchange rate is $1.00 = 0.80. What must the spot exchange rate be to eliminate covered interest arbitrage (CIA) opportunities? (Assume away market barriers and costs)
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Financial Accounting Information For Decisions
Authors: Robert w Ingram, Thomas L Albright
6th Edition
9780324313413, 324672705, 324313411, 978-0324672701
