As a US investor willing to invest $1,000,000 with the information given below: Spot rate of £ =$1.60 180-day forward rate of £ =$1.56 180-day British interest rate = 4% 180-day US interest rate = 3% Is the Covered Interest Arbitrage by the investor is feasible? Explain Does the Interest Rate Parity Condition exist given the above information?
As a US investor willing to invest $1,000,000 with the information given below: Spot rate of £ =$1.60 180-day forward rate of £ =$1.56 180-day British interest rate = 4% 180-day US interest rate = 3% Is the Covered Interest Arbitrage by the investor is feasible? Explain Does the Interest Rate Parity Condition exist given the above information?
Chapter7: International Arbitrage And Interest Rate Parity
Section: Chapter Questions
Problem 17QA
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Question
As a US investor willing to invest $1,000,000 with the information given below:
- Spot rate of £ =$1.60
- 180-day forward rate of £ =$1.56
- 180-day British interest rate = 4%
- 180-day US interest rate = 3%
Is the Covered Interest Arbitrage by the investor is feasible? Explain
Does the Interest Rate Parity Condition exist given the above
information?
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