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A currency dealer can borrow $1,110,000 (or the equivalent in euros) for one year. The one-year interest rate is 2.90% in the U.S. and 6.20%
A currency dealer can borrow $1,110,000 (or the equivalent in euros) for one year. The one-year interest rate is 2.90% in the U.S. and 6.20% in the euro zone. The spot exchange rate is $1.3993/61.00 and the one-year forward exchange rate is $1.3368/1.00. What arbitrage profit results if the trader borrows the maximum available funds? 62,635.70 OR $83,731.40 36,630.00 OR $48,966.98 18,585.78 OR $24,845.47 78,920.98 OR $105,501.57 11,985.50 OR $16,022.22 16,022.22 OR $21,418.50
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