Question
Assume that annual interest rates are 8 percent in the United States and 4 percent in Germany. An FI can borrow (by issuing CDs) or
Assume that annual interest rates are 8 percent in the United States and 4 percent in Germany. An FI can borrow (by issuing CDs) or lend (by purchasing CDs) at these rates. The spot rate is $0.60/EUR.
- If the forward rate is $0.64/EUR, how could the bank arbitrage using a sum of $1million? What is the expected spread?
b. What forward rate will prevent an arbitrage opportunity?
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Impact Investing Instruments Mechanisms And Actors
Authors: Wolfgang Spiess-Knafl Barbara Scheck
1st Edition
3319665553,3319665561
