A currency dealer can borrow $1,180,000 (or the equivalent in euros) for one year. The one-year interest rate is 4.80% in the U.S. and 9.40% in the euro zone. The spot exchange rate is $1.2548/€1.00 and the one-year forward exchange rate is $1.2162/€1.00. 

What arbitrage profit results if the trader borrows the maximum available funds?

Answer rating: 100% (QA)

To take advantage of a loop hole like this the trader can use a method called Covered Interest Arbit... View the full answer