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The risk-free interest rate in Canada is 2% and the risk-free interest rate in Malaysia is 1%. If the spot exchange rate is 3.1 (CAN$1
The risk-free interest rate in Canada is 2% and the risk-free interest rate in Malaysia is 1%. If the spot exchange rate is 3.1 (CAN$1 to RM3.1), and the 3-year forward rate is 3.05, calculate the arbitrage profit that can be made and describe the transactions needed to realise this amount.
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