Question
A forex trader has the following information on SGD and USD: Arbitrage funds available= USD1,000,000 or its SGD equivalent Spot exchange rate (SGD/USD)= 0.7125 SGD
A forex trader has the following information on SGD and USD:
Arbitrage funds available= USD1,000,000 or its SGD equivalent
Spot exchange rate (SGD/USD)= 0.7125
SGD 1-year interest rate= 0.75%
USD 1-year interest rate= 2.25%
Assume if the trader can make a precise forecast and the spot rate in 1 year will be SGD 0.7325/USD, how much arbitrage profit or loss can the trader make?
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Quantitative Analysis for Management
Authors: Barry Render, Ralph M. Stair, Michael E. Hanna, Trevor S. Ha
12th edition
133507335, 978-0133507331
