Question
One year borrowing and deposit interest rates are 10% and 8% respectively in the US and 8% and 6% respectively in Spain. The spot exchange
One year borrowing and deposit interest rates are 10% and 8% respectively in
the US and 8% and 6% respectively in Spain. The spot exchange rate for the
US dollar is $1.25 to the EURO. The 12-month forward rate is $1.30
i) Assuming you do not have any initial investment funds, suggest a way you
might profit from the pricing inconsistency presented above.
(ii) Explain why some of the figures in the question of borrowing and deposit rates are not used.
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
9781285586618
