Question
Suppose you observe the following one-year interest rates, spot exchange rates and futures prices. Futures contracts are available on 125,000. 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 125,000. How much risk-free arbitrage profit could you make on one contract at maturity from this mispricing?
| Exchange Rate | Interest Rate | APR | |
| S0($/) | $1.15 = 1.00 | i$ | 5.0% |
| F360($/) | $1.20 = 1.00 | i | 4.0% |
Group of answer choices
$5,974
$4,794
$5,144
$4,868
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School Finance And Business Management Optimizing Fiscal Facility And Human Resources
Authors: Craig A. Schilling, Daniel R. Tomal
2nd Edition
1475844026, 978-1475844023
