Question
I have the solutions to this question which i have attached as an image but I do not understand how calculate these numbers, please could
I have the solutions to this question which i have attached as an image but I do not understand how calculate these numbers, please could you explain how to achieve these numbers e.g. the 100,775 and 98,557.62 in the attached photo. Question:
Foreign Exchange rate quotations are:
t0 = 0,9890 /$ -0,9900 /$
t3 months= 1,0100 /$ -1,0110 /$.
If Nominal interest rates for both currencies are for a 3 month period (bid/ask annual interest rates) euro: 8,00% / 8,10% and dollar: 3,00% / 3,10%. Are there arbitrage possibilities? Would your answer change if you have the money available for investing? Why?
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