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Chapter 7 In-class Exercise Arbitrage Problems 3. Assume the following regarding Covered Interest rate arbitrage: a) You have $500,000 to invest b) The current spot

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Chapter 7 In-class Exercise Arbitrage Problems 3. Assume the following regarding Covered Interest rate arbitrage: a) You have $500,000 to invest b) The current spot rate for the Australian Dollar is $.76 c) The 90 day forward rate of the Australian Dollar is $.75 d) The 90 day interest rate in the United States is 2% e) The 90 day interest rate in Australia is 4% What is your profit from the arbitrage

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