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Suppose that the annual interest rate is 2% in the US and 4% in Germany, and that the spot exchange rate is $1.15/ and
Suppose that the annual interest rate is 2% in the US and 4% in Germany, and that the spot exchange rate is $1.15/ and the 1-year forward exchange rate is $1.12/. Assume that an arbitrageur based in the US can borrow up to $1,000,000 or 850,000, how much guaranteed US-dollar profit can the arbitrageur earn? O About $9,000. About $13,000. O About $11,000. About $7,000.
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Investments An Introduction
Authors: Herbert B Mayo
9th Edition
324561385, 978-0324561388
