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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 $1 million to invest. You are considering to invest in UK first, then convert the British Pound back to US\$ in the future. You know following information: Annual Interest rate on investment in US: 2% Annual Interest rate on investment in UK: 4\% Investment period: 1 year Current exchange rate: 1.48$/BP Forward exchange rate which you can apply when converting BP to US\$: 1.47 \$/BP What would be profit if you apply the covered-interest arbitrage? None of the above About $48,382 About $24,254 About $40,542
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