Suppose that the interest rates in Norway and the US are, respectively, 8 % and 4 %

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Suppose that the interest rates in Norway and the US are, respectively,

8 %

and

4 % .

Suppose that the spot price of the Norwegian Kroner is $

0.155 .

A three

-

month forward contract on Norwegian Kroner is available for $

0.156 .

Is there a possibility of arbitrage? If yes, how can you earn the arbitrage profit?

Posted Date: May 18, 2024 11:03 PM

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Suppose that the interest rates in Norway and the US are, respectively, 8 % and 4 %

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