Use the following information to answer question 3 and 4 Suppose that the current spot exchange rate

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Use the following information to answer question 3 and 4 Suppose that the current spot exchange rate is €0.80/$ and the bank quoted forward exchange rate is €0.7813/$. The one-year interest rate is 1.4% in the United States and 1.35% in France.

3. According to the Interest Rate Parity condition, what is the 1 year forward exchange rate?

4. What is your arbitrage strategy if you have $1,000,000 or €800,000?

Related Book For answer-question

Financial Institutions Management A Risk Management Approach

ISBN: 978-0071051590

8th edition

Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders

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Posted Date: Mar 07, 2024 10:41 PM

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Use the following information to answer question 3 and 4 Suppose that the current spot exchange rate

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According to the Interest Rate Parity condition the 1year forward excha... View the full answer

Financial Institutions Management A Risk Management Approach

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