Question: undefined Question 2 (Total 20 marks) 1. Assume that you can borrow as much as $100,000,000 to invest for six months. Currently, the spot exchange

undefined Question 2 (Total 20 marks) 1. Assume that you can borrow undefined

Question 2 (Total 20 marks) 1. Assume that you can borrow as much as $100,000,000 to invest for six months. Currently, the spot exchange rate is 1.01 per dollar and the six-month forward exchange rate is 0.99 per dollar. The interest rate is 8.0% per annum in the U.S. and 7% per annum in the U.K. How would you carry out covered interest arbitrage? Show all the steps and determine the arbitrage profit. (10 marks) 2. What should an investor consider before investing in dual-currency bonds? (10 marks)

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