Question
Currently, the GBP/USD rate is 1.5089 and the six-month forward exchange rate is 1.5270. The six-month interest rate is 6.7% per annum in the U.S.
Currently, the GBP/USD rate is 1.5089 and the six-month forward exchange rate is 1.5270. The six-month interest rate is 6.7% per annum in the U.S. and 5.3% 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 foreign currency and invest locally? (USD, no cents)
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Fundamentals Of Contemporary Financial Management
Authors: R. Charles Moyer, James R. McGuigan, Ramesh P. Rao
2nd Edition
0324406363, 978-0324406368
