Question
The spot exchange rate for USD /euro is 1.15; the forward rate in 6 months for USD / euro is 1.12. US interest rate is
The spot exchange rate for USD /euro is 1.15; the forward rate in 6 months for USD / euro is 1.12. US interest rate is 1.5% per year while Europe interest rate is 2.5% per year.
A) Explain Covered Interest Arbitrage.
B) Whats will be the arbitrage profit in 6 months for 1,000,000 Euro using Covered Interest Arbitrage?
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Technical Analysis Of The Financial Markets
Authors: John J. Murphy
1st Edition
0735200661, 978-0735200661
