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Please Answer. Investing interest rates in Thailand are 2 . 5 % p . a . and in Hungary they are currently at 8 .
Please Answer. Investing interest rates in Thailand are pa and in Hungary they are currently at pa The THBHUF spot rate is a Assume no transaction costs. Calculate the theoretical threeyear forward rate of the THB implied by Interest Rate Parity. b Now assume the actual threeyear forward rate is THBHUF What, if any, is the percentage return from engaging in Covered Interest Arbitrage? Assume a transaction cost of in the spot and the forward market. Also assume that borrowing rates are higher than the investing rates in both countries. Your answer will be either choose the appropriate one: A Arbitrage: Calculate the result as a percentage of your initial borrowing, accurate to decimal places, making sure to include any opportunity costs in your calculations B No arbitrage: If there is no arbitrage available then show how you are unable to make money through a covered interest arbitrage process.
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