Question
Let's suppose you have $1 million to invest. You are considering to invest in UK first, then convert the British Pound back to US$ in
Let's suppose you have $1 million to invest.
You are considering to invest in UK first, then convert the British Pound back to US$ in the future.
You know following information:
Annual Interest rate on investment in US: 2%
Annual Interest rate on investment in UK: 4%
Investment period: 1 year
Current exchange rate: 1.52 $/BP
Forward exchange rate which you can apply when converting BP to US$: 1.50 $/BP
What will be profit or loss if you apply the covered-interest arbitrage?
| Profit, about $36,838 | ||
| Profit, about $28,424 | ||
| Profit, about $16,645 | ||
| Profit, about $26,315 |
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Theory Of Constraints Handbook
Authors: James Cox, John Schleier
1st Edition
0071665544, 978-0071665544
