Question

You are an investor with access to €1,000,000.00 or its equivalent amount in U.S.$. You want to conduct an investment. You are provided with the following quotations from a bank:

	Exchange rate	Interest rate
Spot rate (€/$	€0.7000 = $1.00	€ = 4.15% per annum
F360(€/$)	€0.7010 = $1.00	$ = 4.7% per annum

Determine whether an arbitrage opportunity exists for a one year investment and show the following in the space provided below if the arbitrage opportunity exists:

Currency to be borrowed (specify $ or €): …………………

Amount to be borrowed: …………………………

Currency to be invested in (specify $ or €): …………………

Amount to be invested: …………………………

Answer 1

Answer is as follows:

answered by: anonymous