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Table: Bid Ask Borrowing Lending S 0 ($/) $1.42 = 1.00 $1.45 = 1.00 i$ 4.25% APR 4% APR F360 ($/) $1.48 = 1.00 $1.50
Table: Bid Ask Borrowing Lending
S 0 ($/) $1.42 = 1.00 $1.45 = 1.00 i$ 4.25% APR 4% APR
F360 ($/) $1.48 = 1.00 $1.50 = 1.00 i 3.10% APR 3% APR
a. Calculate the no arbitrage 1-year forward BID exchange rate in $ per that that satisfies IRP from the perspective of a customer.
b. Calculate the no arbitrage 1-year forward ASK exchange rate in $ per that that satisfies IRP from the perspective of a customer.
c. Using your answers for a and b, determine if an arbitrage opportunity exist (please explain fully)
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