You are told that the current exchange rate on the Russian rouble is .0336 - .0338 $/rouble on the spot market. An investment bank quotes you a rate of .0310 - .0316 $/rouble for a 12-month forward exchange contract. Assume that the 12-month investment and borrowing rates in the US are 1% and 1.5% (annual) respectively. What range of risk-free rates in Russia does not allow arbitrage?

Answer rating: 100% (QA)

r d riskfree rate in domestic currency ie in the US r f riskfree rat... View the full answer