Question
A foreign exchange trader at State Street (NYSE:STT) has a credit line to borrow up to either 1,000,000 Brazilian real or 7,000,000 Thai baht (the
A foreign exchange trader at State Street (NYSE:STT) has a credit line to borrow up to either 1,000,000 Brazilian real or 7,000,000 Thai baht (the equivalent value) for the purpose of a covered interest arbitrage (CIA) with a 6-month horizon. The rates available to the trader:
Spot exchange rate: | 7.00 bahts per one real |
6-month Forward rate: | 7.10 bahts per one real |
| Thai baht annualized interest: | 8.00% per year |
| Brazilian real annualzied interest: | 4.00% per year |
What would be the covered interest arbitrage profit using these rates?
| 15,510.2 real | ||
| 53,750.0 real | ||
| 5,352.1 baht | ||
| 33,125.0 real | ||
| 53,750.0 baht | ||
| 5,352.1 real | ||
| 15,510.2 baht | ||
| 33,125.0 baht |
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Exchange Rate Chaos 25 Years Of Finance And Consumer Democracy
Authors: Geisst, Charles R.
1st Edition
0415109817, 9780415109819
