The following quotes imply an arbitrage opportunity Spot exchange rate 5 60 rupees per one lira 3 month Forward rate 5 70 rupees per one lira Indian rupee annualized interest 6 00 per year Turkish lira annualzied interest 8 00 per year Which is true about the Covered Interest Arbitrage (CIA) strategy to profit from these quotes Selected Answer The Turkish lira is trading at a forward discount (ag rupee), and the CIA strategy includes borrowing liras Answers The Turkish lira is trading at a forward discount (ag rupee), and the CIA strategy includes borrowing rupees The Turkish lira is trading at a forward discount (ag rupee), and the CIA strategy includes borrowing liras The Turkish lira is trading at a forward premium (ag rupee), and the CIA strategy includes borrowing rupees The Turkish lira is trading at a forward premium (ag rupee), and the CIA strategy includes borrowing liras None of the above

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Posted on Oct 03, 2024

The following quotes imply an arbitrage opportunity:

Spot exchange rate:	5.60 rupees per one lira
3-month Forward rate:	5.70 rupees per one lira
Indian rupee annualized interest:	6.00% per year
Turkish lira annualzied interest:	8.00% per year

Which is true about the Covered Interest Arbitrage (CIA) strategy to profit from these quotes?

Selected Answer:	The Turkish lira is trading at a forward discount (ag. rupee), and the CIA strategy includes borrowing liras
Answers:	The Turkish lira is trading at a forward discount (ag. rupee), and the CIA strategy includes borrowing rupees
	The Turkish lira is trading at a forward discount (ag. rupee), and the CIA strategy includes borrowing liras
	The Turkish lira is trading at a forward premium (ag. rupee), and the CIA strategy includes borrowing rupees
	The Turkish lira is trading at a forward premium (ag. rupee), and the CIA strategy includes borrowing liras
	None of the above