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A Frankfurt based investor has surplus cash of US$1,000,000 to invest in a three month money market account. The three month deposit rates are 7.2%

A Frankfurt based investor has surplus cash of US$1,000,000 to invest in a three month money market account. The three month deposit rates are 7.2% per annum in Euros and 4% per annum in Dollars. The current spot exchange rate is $/1.5000-1.5020. The three month forward offer price for US$ quoted to the investor is 1.4930. Show how the investor can make a risk free investment.

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