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Quotes for the US dollar and ThaiBaht(Bt) are as follows: Spot contract midpoint =Bt24.96/$ 1-year forward contract midpoint =Bt25.64/$ 1-year Eurodollar interest rate = 6.125%
- Quotes for the US dollar and ThaiBaht(Bt) are as follows:
Spot contract midpoint =Bt24.96/$
1-year forward contract midpoint =Bt25.64/$
1-year Eurodollar interest rate = 6.125% annually
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- a. Your newspaper does not quote 1-yearEurocurrencyinterest rates on Thaibaht. Make your own estimate.
- b. Suppose that you can either borrow or lend at a ThaiEurocurrencyinterest rate of 10% per year. Based on a $1 million initial amount, how much profit can you generate through covered interest arbitrage?
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International Financial Management
Authors: Geert Bekaert, Robert Hodrick
3rd edition
1107111820, 110711182X, 978-1107111820
