ou have the following information: the current exchange rate is SGD 0.40/ MYR. Meanwhile, the SGD 0.3907/ MYR of the three-month forward exchange rate. The interest rate of three- month is 5.6 percent per year in RB Malaysia. The interest rate of three-month is S.4 percent per year in CBC Singapore. Assume that you can borrow up to MYR1.000.000. (a) Assuming that you want to realize profit in terms of Ringgit Malaysia/SGD,determine the size of your arbitrage profits. b) Assume that you want to realize profit in terms of Singaporean Dollar. Thow the covered arbitrage process and determine the arbitrage profit in S
ou have the following information: the current exchange rate is SGD 0.40/ MYR. Meanwhile, the SGD 0.3907/ MYR of the three-month forward exchange rate. The interest rate of three- month is 5.6 percent per year in RB Malaysia. The interest rate of three-month is S.4 percent per year in CBC Singapore. Assume that you can borrow up to MYR1.000.000. (a) Assuming that you want to realize profit in terms of Ringgit Malaysia/SGD,determine the size of your arbitrage profits. b) Assume that you want to realize profit in terms of Singaporean Dollar. Thow the covered arbitrage process and determine the arbitrage profit in S
Chapter21: International Cash Management
Section: Chapter Questions
Problem 3ST
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Assuming you have the following information:
the current exchange rate is SGD 0.40/ MYR. Meanwhile, the SGD 0.3907/ MYR of the three-month forward exchange rate. The interest rate of three- month is 5.6 percent per year in RB Malaysia. The interest rate of three-month is S.4 percent per year in CBC Singapore. Assume that you can borrow up to MYR1.000.000.
(a) Assuming that you want to realize profit in terms of Ringgit Malaysia/SGD,determine the size of your arbitrage profits.
b) Assume that you want to realize profit in terms of Singaporean Dollar. Thow the covered arbitrage process and determine the arbitrage profit in SGD.
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