Assume a US annual interest rate of 8% and a European annual interest rate of 6%. If the spot rate for the USD-EUR is 0.74€ and the forward rate is 0.73€. Do we have an arbitrage opportunity? Where should we borrow and where should we invest? What is the final result?

Answer rating: 100% (QA)

To determine whether there is an arbitrage opportunity we need to calculate the noarbitrage forward ... View the full answer