Assume you notice the following information. Assume you spend $1 million USD do an arbitrage trading strategy.
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Question:
Assume you notice the following information. Assume you spend $1 million USD do an arbitrage trading strategy. What is your profit is USD. Remember to consider the profit after you pay back your loan
- Spot (CAD/USD)=1.75
- 1 Year Forward (CAD/USD) = 1.65
- 1 Year Canadian interest rate of 3% in Canadian Dollars (CAD)
- 1 Year US interest rate of 4% in US Dollars (USD
The Canadian dollar:US dollar exchange rate was C$1.15/US$1. One year later, it moved to C$1.25/US$1. The Canadian dollar:
depreciated by 15%
depreciated by 8%
appreciated by 10%
appreciated by 8.7%
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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