Question
b. Suppose that USD/Sterling spot and forward exchange rates are as follows: Spot Rate $2.0080 per 90-day forward rate $2.0056 per 180-day forward rate $2.0018
b. Suppose that USD/Sterling spot and forward exchange rates are as follows:
| Spot Rate | $2.0080 per |
| 90-day forward rate | $2.0056 per |
| 180-day forward rate | $2.0018 per |
Requirement: What opportunities are open to an arbitrageur in the following situations?
1)A 180-day call option to buy 1 for $1.97 costs 2 cents.
2) A 90-day put option to sell 1 for $2.04 costs 2 cents.
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Stocks Bonds And The Investment Horizon
Authors: Haim Levy
1st Edition
9811250146, 978-9811250149
