Question
Currently, the GBP/USD rate is 1.5046 and the six-month forward exchange rate is 1.5287. The six-month interest rate is 6.6% per annum in the U.S.
Currently, the GBP/USD rate is 1.5046 and the six-month forward exchange rate is 1.5287. The six-month interest rate is 6.6% per annum in the U.S. and 6.0% per annum in the U.K. Assume that you can borrow 1,000,000 or its equivalent in USD. How much do you make/lose if you borrow the local currency and invest abroad? (USD, no cents)
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Governing The Modern Corporation Capital Markets Corporate Control And Economic Performance
Authors: Roy C. Smith, Ingo Walter
1st Edition
0195171675,0199924015
