(14) A foreign exchange trader of a bank has an investment of $5 million or may make an investment in the foreign currency equivalent of the short-term funds of the bank in form a covered interest arbitrage. The available fund for arbitrage is$5,000,000.Using the below information, compute the covered Interest arbitrage profit made by the trader.3-month interest rate of U.S. dollar is 3.0%3-month interest rate of Australian dollar is 5.0%Spot exchange rate is (AUD/$) 6.17203-month forward rate is (AUD/$) 6.1980The covered Interest arbitrage profit is $2,634.89.O The covered Interest arbitrage profit is $3,125.75.O The covered Interest arbitrage profit is $5,043.31.O The covered Interest arbitrage profit is $3,763.71.

If interest rates and exchange rates are not in equilibrium then there exist short term…

foreign exchange trader of a bank has an investment of $5 million or may make an investment in the foreign currency equivalent of the short-term funds of the bank in form a covered interest arbitrage. The 5,000,000. sing the below information, compute the covered Interest arbitrage profit made by the trader. -month interest rate of U.S. dollar is 3.0% month interest rate of Australian dollar is 5.0% Dot exchange rate is (AUD/S) 6.1720 month forward rate is (AUD/S) 6.1980 The covered Interest arbitrage profit is $2,634.89. The covered Interest arbitrage profit is $3,125.75.

foreign exchange trader of a bank has an investment of $5 million or may make an investment in the foreign currency equivalent of the short-term funds of the bank in form a covered interest arbitrage. The 5,000,000. sing the below information, compute the covered Interest arbitrage profit made by the trader. -month interest rate of U.S. dollar is 3.0% month interest rate of Australian dollar is 5.0% Dot exchange rate is (AUD/S) 6.1720 month forward rate is (AUD/S) 6.1980 The covered Interest arbitrage profit is $2,634.89. The covered Interest arbitrage profit is $3,125.75.

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

ChapterP2: Part 2: Exchange Rate Behavior

Section: Chapter Questions

Problem 1Q

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