Question
Suppose the USD-sterling spot and forward exchange rates are as follows: Spot Rate 1.4580 90 days forward 1.4666 180 days forward 1.4518 What opportunities are
Suppose the USD-sterling spot and forward exchange rates are as follows:
| Spot Rate | 1.4580 |
| 90 days forward | 1.4666 |
| 180 days forward | 1.4518 |
What opportunities are open to an arbitrageur in the following situations?
A 180-day European call option to buy 1 for $ 1.42 costs 2 cents.
A 90-day European put option to buy 1 for $ 1.49 costs 2 cents
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
