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Suppose one-year US Treasury bill pays 2.32% and one-year Canadian Treasury bill pays 0.79%. The current spot exchange rate is 1 US dollar (USD) =
Suppose one-year US Treasury bill pays 2.32% and one-year Canadian Treasury bill pays 0.79%. The current spot exchange rate is 1 US dollar (USD) = 1.2762 Canadian dollar (CAD) and the one-year forward exchange rate is 1 USD = 1.2337 CAD. How much arbitrage profit can an investor earn on an investment value of CAD 1 million? Answer: CAD DO NOT ROUND YOUR CALCULATIONS UNTIL YOU REACH THE FINAL ANSWER. ENTER YOUR RESPONSE ROUNDED TO TWO (2) DECIMAL PLACES, AND NO SEPARATOR FOR HOUSANDS IS REQUIRED.)
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