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QUESTION 16 A currency dealer has good credit and can borrow either $1,000,000 or 800,000 for one year. The one-year interest rate in the U.S.
QUESTION 16
A currency dealer has good credit and can borrow either $1,000,000 or 800,000 for one year. The one-year interest rate in the U.S. is i$ = 2% and in the euro zone the one-year interest rate is i = 6%. The one-year forward exchange rate is $1.40/ ; what must the spot rate be to eliminate arbitrage opportunities?
A. | 1.2471/$ | |
B. | $1.3472/ | |
C. | $1.2471/ | |
D. | $1.4549/ | |
E. | 1.1547/$ |
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