Given the following information: Exchange rate - Canadian dollar 0.665 per DM (spot) 1 Canadian dollar 0.670 per DM (3 months) Interest rates - DM 7% p.a. Canadian Dollar - 9% p.a. What operations would be carried out to take the possible arbitrage gains?

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
ChapterP2: Part 2: Exchange Rate Behavior
Section: Chapter Questions
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Given the following information:
Exchange rate - Canadian dollar 0.665 per DM (spot)
Canadian dollar 0.670 per DM (3 months)
Interest rates - DM 7% p.a.
Canadian Dollar - 9% p.a.
What operations would be carried out to take the possible arbitrage gains?
Transcribed Image Text:Given the following information: Exchange rate - Canadian dollar 0.665 per DM (spot) Canadian dollar 0.670 per DM (3 months) Interest rates - DM 7% p.a. Canadian Dollar - 9% p.a. What operations would be carried out to take the possible arbitrage gains?
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