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Floyd Khoza is a foreign exchange trader with HSBC . He notices the following quotes. Spot exchange rate CAD 1 . 2 0 5 1
Floyd Khoza is a foreign exchange trader with HSBC He notices the following quotes.
Spot exchange rate CADUS$
year forward exchange rate CADUS$
year US$ interest rate per year
year CAD interest rate per year
Is the interest rate parity holding? You may ignore transaction costs.
Is there an arbitrage opportunity? If yes, show what steps need to be taken to make
arbitrage profit. Assuming that Floyd Khoza is authorized to work with US$
compute the arbitrage profit in dollars.
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