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3. [4pt) Holt has obtained several forward contract quotations for the Thai baht to determine whether covered interest arbitrage may be possible. He was quoted
3. [4pt) Holt has obtained several forward contract quotations for the Thai baht to determine whether covered interest arbitrage may be possible. He was quoted a forward rate of $0.0225 per Thai baht for a 90-day forward contract. The current spot rate is $0.0227. Ninety-day interest rates available to Blades in the U.S. are 2 percent, whereas 90-day interest rates in Thailand are 3.75 percent (these rates are not annualized) Determine whether the forward rate is priced appropriately. If it is not priced appropriately, determine the profit you could generate by withdrawing $100,000 from checking account and engaging in covered interest arbitrage. Measure the profit as the excess amount above the return you could generate by investing in the U.S. money market
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