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please show work CIA Calculate the Covered Interest Arbitrage profit opportunity from the bank's error in foreasting a forward rate compared to the correct IRP
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CIA Calculate the Covered Interest Arbitrage profit opportunity from the bank's error in foreasting a forward rate compared to the correct IRP forward rate. SPOT = 74 Pds/$ USA annual interest= 2.5% U Kingdom annual interest 6.2% 0.754855 Pounds / $ is the correct IRP forward rate in future at 198 days 0.754477 Pounds / $ is the forward rate offered by the bank also 198 days To implement CIA profit, first determine which currency to borrow, which to invest Once the correct currency to borrow is identified, the amount to borrow = 750,000Step by Step Solution
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