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1. The current Nasdaq price of Alphabet Inc. (GOOGLE) is $1,220. Continuously compounded 6-month interest rate is 2.32% (per year). a) What is the 6-month
1. The current Nasdaq price of Alphabet Inc. (GOOGLE) is $1,220. Continuously compounded 6-month interest rate is 2.32% (per year). a) What is the 6-month equilibrium forward price? b) Capital One brokerage firm is ready to trade 6-mth. FRW contract on the stock at $1,226. Describe the transactions necessary to take advantage of this arbitrage opportunity. Calculate the arbitrage profit. 2. A client wishes to buy forward EUR 10 million with USD for a period of ten months. How much will they be charged? FOREX: USD/EUR = 1.25 Money market: USD LIBOR 10 months = 2.53% EUR LIBOR 10 months = 0.29% (continuously compounded, per year)
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