Assume the following information: Initial Arbitrage Capital = $1,000,000 Current spot rate of pound=$1.30 90-day forward rate

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Assume the following information:

Initial Arbitrage Capital = $1,000,000

Current spot rate of pound=$1.30

90-day forward rate of pound =$1.28

3-month deposit rate in United States=3%

3-month deposit rate in Great Britain=4%

Are there arbitrage opportunities? If yes, for who? What is the arbitrage profit?

Related Book For answer-question

Financial Markets and Institutions

ISBN: 978-1337099745

12th edition

Authors: Jeff Madura

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Posted Date: Dec 04, 2019 11:24 PM

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Assume the following information: Initial Arbitrage Capital = $1,000,000 Current spot rate of pound=$1.30 90-day forward rate

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Financial Markets and Institutions

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