Explain why the currency of Country A, whose interest rates are twice as great as those in

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Explain why the currency of Country A, whose interest rates are twice as great as those in Country B, must trade at a forward discount. If there were no difference between the spot and forward exchange rates in this interest rate environment, what arbitrage trade could be constructed to take advantage of the situation?

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Investment Analysis and Portfolio Management

ISBN: 978-0538482387

10th Edition

Authors: Frank K. Reilly, Keith C. Brown

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