Suppose you have the following information: $ per Euro spot quote 1.1520 $ per Euro one-year forward quote 1.1760 US $ interest rate 4.
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Question

Suppose you have the following information:


$ per Euro spot quote 1.1520

$ per Euro

one-year forward quote 1.1760

US $ interest rate 4.5% per annum

Euro interest rate 3% per annum

Are there any arbitrage opportunities? If yes, show how and calculate the profit.

Top Answer

Forward price=Spot pricex (1+domestic interest rate)/(1+foreign... View the full answer

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