Are these quotes conforming to interest rate parity (IRP), or is covered interest arbitrage possible? If...

 

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Are these quotes conforming to interest rate parity (IRP), or is covered interest arbitrage possible? If yes, calculate CIA profit if you begin with either USS I million or DKr 60 million. Exchange Rates Spot Quotation: I Year Forward DKr/S 5.8100 / 5.8150 DKr/$ 5.7000 /5.7100 Interest Rates USS DKr Invest / Borrow. 5.75% / 5.875% 3.50% / 3.625% Are these quotes conforming to interest rate parity (IRP), or is covered interest arbitrage possible? If yes, calculate CIA profit if you begin with either USS I million or DKr 60 million. Exchange Rates Spot Quotation: I Year Forward DKr/S 5.8100 / 5.8150 DKr/$ 5.7000 /5.7100 Interest Rates USS DKr Invest / Borrow. 5.75% / 5.875% 3.50% / 3.625%

Answer rating: 100% (QA)

This is a typical question of Covered Interest Arbitrage wherein the trader tries to borrow from cou... View the full answer