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The spot rate (current exchange rate) is Z2.01/$ The one-year forward rate is Z2.05/$ The annual risk-free borrowing/investing rate in the U.S. is 2.95% The
The "spot rate" (current exchange rate) is Z2.01/$
The one-year forward rate is Z2.05/$
The annual risk-free borrowing/investing rate in the U.S. is 2.95%
The annual risk-free borrowing/investing rate in Country Z is 5.99%
In one round of arbitrage trades, how much money can you make by borrowing in one market and simultaneously investing in the other? Assume that you are starting out with $1,000,000 and that there are no transaction costs.
Answer: 9719
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