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A currency dealer can borrow $890,000 (or the equivalent in euros) for one year. The one-year interest rate is 2.70% in the U.S. and 7.30%
A currency dealer can borrow $890,000 (or the equivalent in euros) for one year. The one-year interest rate is 2.70% in the U.S. and 7.30% in the euro zone. The spot exchange rate is $1.5950/1.00 and the one-year forward exchange rate is $1.4967/1.00. What arbitrage profit results if the trader borrows the maximum available funds? 40,940.00 OR $61,274.90 9,695.37 OR $14,511.06 27,839.20 OR $41,666.93 11,969.59 OR $17,914.89 17,914.89 OR $26,813.22 60,985.43 OR $91,276.89
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