in profit oon vou oarn on $10 500 utilizing covered interest arbitrage?

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter7: International Arbitrage And Interest Rate Parity
Section: Chapter Questions
Problem 30QA
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QUESTION 10
The spot rate between Canada and the U.S. is Can$1.2437/$, while the one-year forward rate is
Can$1.2436/$. The risk-free rate in Canada is 4.57 percent and risk-free rate in the United States is 2.73
percent. How much in profit can you earn on $10,500 utilizing covered interest arbitrage?
O $169.82
O $194.08
O $155.27
O $216.36
O $192.32
Transcribed Image Text:QUESTION 10 The spot rate between Canada and the U.S. is Can$1.2437/$, while the one-year forward rate is Can$1.2436/$. The risk-free rate in Canada is 4.57 percent and risk-free rate in the United States is 2.73 percent. How much in profit can you earn on $10,500 utilizing covered interest arbitrage? O $169.82 O $194.08 O $155.27 O $216.36 O $192.32
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