Question
One year U.S. interest rates are 7%, and European interest rates are 5%. The spot euro direct exchange rate quote is 1.30 and the 1-year
One year U.S. interest rates are 7%, and European interest rates are 5%. The spot euro direct exchange rate quote is 1.30 and the 1-year forward rate direct quote is 1.25. If you can borrow either $1 million or 1 million euros to start with, what would be your dollar profits from interest arbitrage based on these data?
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Finance For Executives Managing For Value Creation
Authors: Gabriel Hawawini, Claude Viallet
6th Edition
1473749247, 9781473749245
