Question
1. Given the following exchange rates and interest rates for $ and . (1) Determine if covered interest arbitrage opportunity exists. (SHOW YOUR WORK!) (2)
1. Given the following exchange rates and interest rates for $ and .
(1) Determine if covered interest arbitrage opportunity exists. (SHOW YOUR WORK!)
(2) Show clearly in a CASH FLOW TABLE FORMAT the transactions involved and the resulted cash flow from each transaction at each time period. Assume that you can borrow up to $1,000,000 (or 1,000,000).
Bid Ask
S($/) 1.4223 1.4285
F12($/) 1.4035 1.4078
Annual dollar interest rate (%) 1.65 1.75
Annual pound interest rate (%) 2.3 2.5
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The Meaningful Money Handbook
Authors: Pete Matthew
1st Edition
0857196510, 978-0857196514
