Question
1. Suppose the following FX rates prevail; Spot rate: $1 = 45.46 dalasi One-year forward rate: $1 = 38.46 One-year interest rates: U.S. = 4.78%
1. Suppose the following FX rates prevail;
Spot rate: $1 = 45.46 dalasi
One-year forward rate: $1 = 38.46
One-year interest rates: U.S. = 4.78% Country 2 = 7.39%
a. Explain how a trader can earned a profit through covered interest arbitrage.
b. Calculate the profit to be earned per dollar.
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Financial Accounting
Authors: David Spiceland, Wayne Thomas, Don Herrmann
4th edition
1259307956, 978-1259307959
