Business, 21.10.2021 01:50 madgiemiller2309

An American currency dealer has good credit and can borrow either $1,000,000 or €800,000 for one year. The one-year interest rate is i$ = 2% in the U. S. and i€ = 6% in the euro zone, respectively. The spot exchange rate is $1.25 = €1.00 and the one-year forward exchange rate is $1.20 = €1.00. Show how you can realize a certain dollar profit via covered interest arbitrage.

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An American currency dealer has good credit and can borrow either $1,000,000 or €800,000 for one yea...

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