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A currency dealer can borrow $1,180,000 (or the equivalent in euros) for one year. The one-year interest rate is 4.80% in the U.S. and 9.40%
A currency dealer can borrow $1,180,000 (or the equivalent in euros) for one year. The one-year interest rate is 4.80% in the U.S. and 9.40% in the euro zone. The spot exchange rate is $1.2548/1.00 and the one-year forward exchange rate is $1.2162/1.00. What arbitrage profit results if the trader borrows the maximum available funds?
Question 12 options:
| $18,211.10 OR 14,973.77 |
| $86,082.25 OR 70,779.68 |
| $11,979.02 OR 9,849.55 |
| $14,568.88 OR 11,979.02 |
| $73,574.57 OR 60,495.45 |
| $54,280.00 OR 44,630.82 |
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