Question
Suppose that the current EUR/GBP rate is 0.6668 and the one-year forward exchange rate is 0.6742. The one-year interest rate is 1.8% in euros and
Suppose that the current EUR/GBP rate is 0.6668 and the one-year forward exchange rate is 0.6742. The one-year interest rate is 1.8% in euros and 3.6% in pounds. You can borrow at most 1,000,000 or the equivalent pound amount. Suppose you are a pound-based investor. Determine the profit/loss (in GBP, no cents) if you borrow locally and invest in Euros.
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
9781285586618
