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Intro You have $22,000 to invest and observe the following interest rates and exchange rates: Annual interest rates Deposit rate Loan rate Dollar 3.4% 4.1%
Intro
You have $22,000 to invest and observe the following interest rates and exchange rates:
Annual interest rates | Deposit rate | Loan rate |
Dollar | 3.4% | 4.1% |
Ruble | 7.6% | 8.5% |
Exchange rates | Bid | Ask |
Ruble spot | $0.012 | $0.013 |
Ruble 1-year forward | $0.014 | $0.015 |
Attempt 1/6 for 10 pts.
Part 1
What is your risk-free rate of return (yield) from exploiting the higher interest rate in Russia?
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