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11) Suppose that the annual interest rate is 2.0 percent in the United States and 4 percent in Germany, and that the spot exchange rate

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11) Suppose that the annual interest rate is 2.0 percent in the United States and 4 percent in Germany, and that the spot exchange rate is $1.60/ and the forward exchange rate, with one-year maturity, is $1.58/. Assume that an arbitrager can borrow up to $1,000,000 or 625,000. If an astute trader finds an arbitrage, what is the net cash flow in one year? A) $7,000 B) $238.65 C) $46,207 D) $14,000 11) A American Terms Bank Quotations Bid Ask British pounds $ 1.9712 $ 1.9717 0.5072 Euros $ 1.4738 $ 1.4742 0.6783 Using the table above, what is the ask price of pounds in terms of euro? A) 1.3371/ B) 0.7479/ 1.3378/ European Terms BidMin to buy Ask-M Sell, 0.5073 0.6785 D) 0.74757 / E

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