Question: Make sure to show work and give explanation 7. (5 pts.) Suppose you observe the following one-year interest rates, spot exchange rates and futures prices.

Make sure to show work and give explanation 7. (5 pts.)

Make sure to show work and give explanation

7. (5 pts.) Suppose you observe the following one-year interest rates, spot exchange rates and futures prices. Futures contracts are available on 10,000. How much risk-free arbitrage profit could you make on one contract at maturity from this mispricing? Exchange Rate Interest Rate APR Sn(S/E) $1.45 = 1.00 is 4% F360($/) $1.48 = 1.00 If 3%

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