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Assume you have the following information: Spot Rate: 5.11 CNY (Chinese Yuan) / 1 CAD (Canadian Dollar) Seven-month Forward Exchange Rate: 5.30 CNY/1 CAD One-Year
Assume you have the following information:
Spot Rate: 5.11 CNY (Chinese Yuan) / 1 CAD (Canadian Dollar)
Seven-month Forward Exchange Rate: 5.30 CNY/1 CAD
One-Year CAD Interest Rate: 0.70% annually
One-Year CNY Interest Rate: -0.25% annually
Is covered interest arbitrage worthwhile? If so, calculate the profits after seven months, assuming that you have 10,000 CAD. what else may you do to maximize profits if the covered interest arbitrage is worthwhile?
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