The Dollar to Euro spot exchange rate is $1.5459/1.00, the Dollar to Yen spot exchange rate...
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The Dollar to Euro spot exchange rate is $1.5459/€1.00, the Dollar to Yen spot exchange rate is $0.0100/1.00, and the Euro to Yen spot exchange rate is €0.006689/1.00. Determine the triangular arbitrage profit that is possible if you have $8,000,000. A currency dealer can borrow $1,400,000 (or the equivalent in euros) for one year. The one-year interest rate is 4.80% in the U.S. and 7.60% in the euro zone. The spot exchange rate is $1.2853/€1.00 and the one-year forward exchange rate is $1.2362/€1.00. What arbitrage profit results if the trader borrows the maximum available funds? The Dollar to Euro spot exchange rate is $1.5459/€1.00, the Dollar to Yen spot exchange rate is $0.0100/1.00, and the Euro to Yen spot exchange rate is €0.006689/1.00. Determine the triangular arbitrage profit that is possible if you have $8,000,000. A currency dealer can borrow $1,400,000 (or the equivalent in euros) for one year. The one-year interest rate is 4.80% in the U.S. and 7.60% in the euro zone. The spot exchange rate is $1.2853/€1.00 and the one-year forward exchange rate is $1.2362/€1.00. What arbitrage profit results if the trader borrows the maximum available funds?
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Answer rating: 100% (QA)
SOLUTION To determine whether a triangular arbitrage opportunity exists we need to compare the cross exchange rate implied by the given spot exchange ... View the full answer
Related Book For
International Economics Theory and Policy
ISBN: 978-0134519579
11th Edition
Authors: Paul R. Krugman, Maurice Obstfeld, Marc Melitz
Posted Date:
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