Suppose that the U.S. interest rate on one year Treasury notes was 4.7%. We will use this as the annual interes the U.S. And suppose that the interest rate on the one-year German Treasury note was 4.2%. The spot rate is 1. EUR/USD.. And the 3-month forward rate is 1.0188 Eur/USD. Is there an opportunity for covered interest arbitra If so, what would be the total profit if we borrowed $25 million? OA YES-$27,395.21 would be the profit B. YES- $33,385.41 would be the profit OC. YES-$37,342.89 would be the profit OD. NO-there is no opportunity for a profit

Suppose that the U.S. interest rate on one year Treasury notes was 4.7%. We will use this as the annual interes the U.S. And suppose that the interest rate on the one-year German Treasury note was 4.2%. The spot rate is 1. EUR/USD.. And the 3-month forward rate is 1.0188 Eur/USD. Is there an opportunity for covered interest arbitra If so, what would be the total profit if we borrowed $25 million? OA YES-$27,395.21 would be the profit B. YES- $33,385.41 would be the profit OC. YES-$37,342.89 would be the profit OD. NO-there is no opportunity for a profit

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter22: International Financial Management

Section: Chapter Questions

Problem 2P

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Suppose that the U.S. interest rate on one year Treasury notes was 4.5%. We will use this as the annual interest rate in the U.S. And suppose that the interest rate on the one-year German Treasury note was 4.1%. The spot rate is 1.0162 EUR/USD.. And the 3-month forward rate is 1.0188 Eur/USD. Is there an opportunity for covered interest arbitrage? If so, what would be the total profit if we borrowed $20 million for 3 months? A. YES- $27,395.21 would be the profit B. YES- $29,385.41 would be the profit C. YES- $31,695.53 would be the profit D. YES- $33,875.42 would be the profit E. NO- there is no opportunity for a profit
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