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The no-arbitrage price of a one-year Euro currency forward contract is USD 1.35 per Euro while the spot rate is USD 1.3 per Euro. The
The no-arbitrage price of a one-year Euro currency forward contract is USD 1.35 per Euro while the spot rate is USD 1.3 per Euro. The Euro rate is 4% and USD rate is 8%. Suppose the available quote on this contract is USD 1.2 per Euro, demonstrate step by step the arbitrage strategy.
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