Question
The following exchange and interest rate quotations in 1998 were observed: Eurocurrency rates Exchange rate per $ 90-days (% annum) (Discretely-compounded) Spot 90-day forward Bid:
The following exchange and interest rate quotations in 1998 were observed:
|
|
Eurocurrency rates |
Exchange rate per $ | |||||
|
|
90-days (% annum) (Discretely-compounded) |
Spot |
90-day forward | ||||
|
Bid:
Ask: |
$
15 5/8
16 |
DM
7 7/8
8 1/4 |
12 1/4
13 |
DM
1.881
1.843 |
.4961
.4902 |
DM
1.801
1.773 |
.4937
.4889 |
An arbitrage profit can be obtained by
a) borrowing pounds and lending dollars
b) borrowing dollars and lending DM
c) borrowing DM and lending pounds
d) there are no arbitrage opportunities
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Economics For Financial Markets
Authors: Brian Kettell
1st Edition
0750653841, 978-0750653848
