Question
40) Suppose that the annual interest rate is 2.5 percent in the United States and 4.3 percent in Germany, and that the EUR/USD spot exchange
40)
Suppose that the annual interest rate is 2.5 percent in the United States and 4.3 percent in Germany, and that the EUR/USD spot exchange rate is 1.1011 and the forward exchange rate, with one-year maturity, is 1.1339. Assume that an arbitrager can borrow up to $1,000,000. If an astute trader finds an arbitrage, what is the net cash flow in one year? ($XX,XXX.XX)
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Handbook Of The Fundamentals Of Financial Decision Making
Authors: Leonard C MacLean, William T Ziemba
1st Edition
9814417343, 978-9814417341
