Question
Suppose you observe the following one-year interest rates, spot exchange rates and futures prices. Futures contracts are available on 10,000. How much risk-free arbitrage profit
Suppose you observe the following one-year interest rates, spot exchange rates and futures prices. Futures contracts are available on 10,000. How much risk-free arbitrage profit could you make on one contract at maturity from this mispricing?
Bid | Interest Rate | ||
S0($/) | $1.45 = 1.00 | i$ | 4% |
F360($/) | $1.47 = 1.00 | i | 3% |
A) $59.22
B) $53.10
C) $49.42
D) none of the options
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
Economics And The Environment A Materials Balance Approach
Authors: Allen V Kneese, Robert U Ayres, Ralph C D'Arge
1st Edition
1317402251, 9781317402251
