Question
(Ch. 7) Covered Interest Arbitrage. Assume the following information: St = 1.19 in EURUSD Ft,90 = 1.18 in EURUSD iEUR = 1.50% iUSD = 0.5%
(Ch. 7) Covered Interest Arbitrage. Assume the following information:
St = 1.19 in EURUSD
Ft,90 = 1.18 in EURUSD
iEUR = 1.50%
iUSD = 0.5%
T = 90 days
Given this information, is covered interest arbitrage possible? Design a covered arbitrage strategy and calculate its profits.
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Contemporary Financial Management
Authors: R. Charles Moyer, James R. McGuigan, Ramesh P. Rao
14th edition
1337090581, 978-1337090582
