Suppose one-year German Treasury bill pays 4.28% and one-year Canadian Treasury

bill pays 2.23%. The current spot exchange rate is 1 Euro (EUR) = 1.3683 Canadian

dollar (CAD) and the one-year forward exchange rate is 1 EUR = 1.3535 CAD. How

much arbitrage profit can an investor earn on an investment value of CAD 2 million?

Answer:

CAD

(DO NOT ROUND YOUR CALCULATIONS UNTIL YOU REACH THE FINAL

ANSWER. ENTER YOUR RESPONSE ROUNDED TO TWO DECIMAL PLACES,

AND NO SEPARATOR FOR THOUSANDS.)