Question
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?
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Cost-Benefit Analysis Concepts and Practice
Authors: Anthony E. Boardman, David H. Greenberg, Aidan R. Vining, David L. Weimer
5th edition
1108401295, 9781108415996, 1108415997, 978-1108401296
