Question
(a) What is interest rate arbitrage? (b) If you observe the following rates: i c$ = 4%; i $ = 3%; S t = C$1.0150/$
(a) What is interest rate arbitrage?
(b) If you observe the following rates: ic$ = 4%; i$ = 3%; St = C$1.0150/$ and Ft+6 = C$1.0160/$,
(i) Do these rates offer interest rate arbitrage opportunity?
(ii) If arbitrage opportunity exists, calculate the arbitrage profit.
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Financial Institutions Management
Authors: Anthony Saunders
3rd Edition
007303259X, 978-0073032597
