Question
Consider the following quotes. Spot rate: $1.5000/ Six month forward rate: $1.5625/ Six month U.S. interest rate: 6.000% p.a. Six month U.K. interest rate: 5.000%
Consider the following quotes.
Spot rate: $1.5000/ Six month forward rate: $1.5625/ Six month U.S. interest rate: 6.000% p.a. Six month U.K. interest rate: 5.000% p.a.
Does interest rate parity hold? If not, show the covered interest arbitrage. Use the equivalent of $50,000.
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Project Financing Asset-Based Financial Engineering
Authors: John D Finnerty
3rd Edition
1118421841, 9781118421840
