Question: If you can borrow $ 1 , 0 0 0 , 0 0 0 , determine if there is an arbitrage opportunity. If any arbitrage

If you can borrow $

1, 000, 000,

determine if there is an arbitrage opportunity. If any arbitrage opportunity exists, what is the final net CF to you assuming you conduct a covered interest parity strategy to exploit any arbitrage opportunity? You have to following information:

Spot exchange rate

=

1.0500 / .

IUSD:

5 %

per annum U

.

.

IEUR:

3 %

per annum in Euro zone

1 -

yr: $

1.0704 /

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