Kathy Smooth has $500,000 to invest, and the details as follows:

The spot rate for the euro is $0.95
The 180-day forward rate of the euro is $0.95
The 180-day interest rate in the U.S. is 0.8%
The 180-day interest rate in Europe is 2%
If she conducts arbitrage, compute the amount will Kathy Smooth make after 180 days?

Answer rating: 100% (QA)

To determine whether arbitrage is possible and to calculate the potential profit we can use the following steps Step 1 Calculate the dollar amount tha... View the full answer