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Please do this question 100% correctly, I am not getting this question correctly 3. 100 points value: Assume that annual interest rates are 5 percent
Please do this question 100% correctly, I am not getting this question correctly
3. 100 points value: Assume that annual interest rates are 5 percent in the United States and 4 percent in Turkey. An FI can borrow (by issuing CDs) or lend (by purchasing CDs) at these rates. The spot rate is $0.6665/Tukish lira (TL) a. If the forward rate is $0.6735/TL, how could the bank arbitrage using a sum of $9 million? What is the spread earned? (Do not round intermediate calculations. Round your answer to 4 decimal places. (e.g., 32.1616) Spread earned b. At what forward rate is this arbitrage eliminated? (Do not round intermediate calculations. Round your answer to 5 decimal places. (e.g., 32.16161)) Forward rate ITLStep by Step Solution
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