Question
One year borrowing and deposit interest rates are 12.5% and 10.5% respectively in the US and 10.5% and 8.5% respectively in Germany. The spot exchange
One year borrowing and deposit interest rates are 12.5% and 10.5% respectively in
the US and 10.5% and 8.5% respectively in Germany. The spot exchange rate for the
US dollar is $1.50 to the EURO. The 12-month forward rate is $1.55
i) Assuming you do not have any initial investment funds, suggest a way you
might profit from the pricing inconsistency presented above.
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An Introduction to Investment Banks, Hedge Funds, and Private Equity
Authors: David P. Stowell
1st edition
978-0123745033, 0123745039, 978-9380931074
