Question
Find the arbitrage opportunity in following 'covered interest arbitrage' problem: Interest on Euro is 10 % in Brussels Interest on USD is 8% in New
Find the arbitrage opportunity in following 'covered interest arbitrage' problem:
Interest on Euro is 10 % in Brussels
Interest on USD is 8% in New York
The Euro spot rate is 1.1293 USD
The 1-year forward rate is 0.9323 USD
If there is an arbitrage opportunity, calculate the profit based on 1,000,000 transaction and 1 year horizon.
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Fundamentals Of Corporate Finance
Authors: Berk, Peter DeMarzo, Jarrad Harford
3rd Global Edition
1292018402, 9781292018409
