International Finance

Question 21 (4 marks) You notice the 270 day interest rate in the UK is 2.45%, whilst the interest rate in Australia is 0.25% for the same period. You also note that the GBP/AUD is 1.9616 and that the 270 day forward rate is 1.9588. By borrowing AUD1m in Australia and investing the proceeds in the UK, what profit can you lock in without any risk? Both countries use 365 day count convention. AUD 16,670.01 AUD14,820.69 GBP 9,239.03 AUD 16,700.84