Suppose you have a credit line of $6,000,000 in the US and Euros 5,000,000 in Euro...
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Suppose you have a credit line of $6,000,000 in the US and Euros 5,000,000 in Euro zone, and that you can borrow and lend at the prevailing rates of interest in these two areas. Current spot rate of Euro = $1.200; Expected spot rate for Euro, one year from now $1.164; Interest rate in the U.S. = 7.50%; Interest rate in the Euro zone = 12.50%. If the current 1-year forward rate for Euro is $1.152, your covered interest arbitrage profit will be:? Suppose you have a credit line of $6,000,000 in the US and Euros 5,000,000 in Euro zone, and that you can borrow and lend at the prevailing rates of interest in these two areas. Current spot rate of Euro = $1.200; Expected spot rate for Euro, one year from now $1.164; Interest rate in the U.S. = 7.50%; Interest rate in the Euro zone = 12.50%. If the current 1-year forward rate for Euro is $1.152, your covered interest arbitrage profit will be:?
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