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Assume the following information: Quoted Price Spot rate of Chinese yuan $0.165 90-day forward rate of Chinese yuan $0.169 annual Chinese yuan interest rate 4.8%
Assume the following information: Quoted Price Spot rate of Chinese yuan $0.165 90-day forward rate of Chinese yuan $0.169 annual Chinese yuan interest rate 4.8% annual U.S. interest rate 3.6% Given this information, answer the following questions: 1) Is there an arbitrage opportunity? 2) if yes, list the steps how the investor can do to make arbitrage profit? 3). calculate the profit you can make suppose the investor invests $1,000,000 or 6,600,000 Chinese yuan.
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