Question
Suppose the annual interest rate is 1.5% in the US and 3% in Germany, and that the spot exchange rate is $1.57/ and the forward
Suppose the annual interest rate is 1.5% in the US and 3% in Germany, and that the spot exchange rate is $1.57/ and the forward exchange rate, with one-year maturity, is $1.58/. Assume that an arbitrager can borrow up to $1,000,000 or 625,000. If an astute trader finds an arbitrage, what is the arbitrage profit in one year?
A)13,390
B)10,262
C)46,207
D)21,561
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Technical Analysis The Complete Resource for Financial Market Technicians
Authors: Charles D. Kirkpatrick, Julie R. Dahlquist
1st edition
134137043, 134137049, 978-0131531130
