1. Assume that the following spot exchange rates exist today: 1 = $1.50 C$=$.75 1 =...
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1. Assume that the following spot exchange rates exist today: £1 = $1.50 C$=$.75 £1 = CS2 Assume no transaction costs. Based on these exchange rates, can triangular arbitrage be used to earn a profit? Explain. 2. Assume the following information: Spot rate of £ $1.60 180-day forward rate of £= $1.56 180-day British interest rate = $4% 180-day U.S interest rate = $3% Based on this information, is covered interest arbitrage by U.S. investors feasible (assuming that U.S. investors use their own funds)? Explain. 1. Assume that the following spot exchange rates exist today: £1 = $1.50 C$=$.75 £1 = CS2 Assume no transaction costs. Based on these exchange rates, can triangular arbitrage be used to earn a profit? Explain. 2. Assume the following information: Spot rate of £ $1.60 180-day forward rate of £= $1.56 180-day British interest rate = $4% 180-day U.S interest rate = $3% Based on this information, is covered interest arbitrage by U.S. investors feasible (assuming that U.S. investors use their own funds)? Explain.
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