# A 1160000 b 250000 c 500000 d no arbitrage is

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A) \$1,160,000 B) \$250,000 C) \$500,000 D) No arbitrage is possible A 31) The \$/CD spot bid-ask rates are \$0.7560–\$0.7625. The 3-month forward points are 12–16. Determine the \$/CD 3-month forward bid-ask rates. A) \$0.7572–\$0.7641 B) \$0.7548–\$0.7609 C) \$0.7512–\$0.7616 D) Cannot be determined with the information given. C 32) If one has agreed to buy a foreign exchange forward, A) you have a short position in the forward contract. B) you have a long position in the spot market. C) you have a long position in the forward contract.

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D) restoring equilibrium prices quickly. A 39) Suppose that the annual interest rate is 5.0 percent in the United States and 3.5 percent in Germany, and that the spot exchange rate is \$1.12/€ and the forward exchange rate, with one-year maturity, is \$1.16/€. Assume that an arbitrager can borrow up to \$1,000,000. If an astute trader finds an arbitrage, what is the net cash flow in one year? A) \$21,964.29 B) \$46,207 C) \$10,690 D) \$15,000 C 40) The interest rate at which the arbitrager borrows tends to be higher than the rate at which he lends, re- flecting the A) midpoint. B) transaction cost paradigm. C) bid-ask spread. D) none of the options

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• One '16
• robert bai
• Exchange Rate, Foreign exchange market, United States dollar

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