Question
2) The spot exchange rate for USD /euro is 1.15; the forward rate in 6 months for USD / euro is 1.12. US interest rate
2) The spot exchange rate for USD /euro is 1.15; the forward rate in 6 months for USD / euro is 1.12. US interest rate is 1.5% per year while Europe interest rate is 2.5% per year. You have 1,000,000 euros to invest.
A.)Calculate the amount of USD you will have in 6 months, including interest income, by converting euro in spot rate and investing in US interest rate.
b.)Calculate the number of euro you will have in one year by converting the USD back to Euro using the forward rate.
c.)Whats will be the arbitrage profit in 6 months for 1,000,000 Euro using Covered Interest Arbitrage?
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Applications In Energy Finance
Authors: Christos Floros, Ioannis Chatziantoniou
1st Edition
3030929566, 978-3030929565
