A currency dealer can borrow $1,400,000 (or the equivalent in euros) for one year. The one-year interest rate is 6.80% in the U.S. and 4.20% in the euro zone. The spot exchange rate is $1.2128/€1.00 and the one-year forward exchange rate is $1.2597/€1.00. What arbitrage profit results if the trader borrows the maximum available funds? $77,688.53 OR €61,672.25 $36,400.00 OR €28,895.77 $9,850.03 OR €7,819.35 $100,995.09 OR €80,173.92 $15,887.14 OR €12,611.84 $20,013.03 OR €15,887.14

A currency dealer can borrow $1,400,000 (or the equivalent in euros) for one year. The one-year interest rate is 6.80% in the U.S. and 4.20% in the euro zone. The spot exchange rate is $1.2128/€1.00 and the one-year forward exchange rate is $1.2597/€1.00. What arbitrage profit results if the trader borrows the maximum available funds? $77,688.53 OR €61,672.25 $36,400.00 OR €28,895.77 $9,850.03 OR €7,819.35 $100,995.09 OR €80,173.92 $15,887.14 OR €12,611.84 $20,013.03 OR €15,887.14

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter22: International Financial Management

Section: Chapter Questions

Problem 2P

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