Suppose one-year German Treasury bill pays 4.2% and one-year Canadian Treasury bill pays 2.94%. The current spot exchange rate is 1 Euro (EUR) = 1.3588 Canadian dollar (CAD) and the one-year forward exchange rate is 1 EUR = 1.3229 CAD. How much arbitrage profit can an investor earn on an investment value of CAD 1 million? Answer: CAD (DO NOT ROUND YOUR CALCULATIONS UNTIL YOU REACH THE FINAL ANSWER. ENTER YOUR RESPONSE ROUNDED TO TWO DECIMAL PLACES, AND NO SEPARATOR FOR THOUSANDS.)
Suppose one-year German Treasury bill pays 4.2% and one-year Canadian Treasury bill pays 2.94%. The current spot exchange rate is 1 Euro (EUR) = 1.3588 Canadian dollar (CAD) and the one-year forward exchange rate is 1 EUR = 1.3229 CAD. How much arbitrage profit can an investor earn on an investment value of CAD 1 million? Answer: CAD (DO NOT ROUND YOUR CALCULATIONS UNTIL YOU REACH THE FINAL ANSWER. ENTER YOUR RESPONSE ROUNDED TO TWO DECIMAL PLACES, AND NO SEPARATOR FOR THOUSANDS.)
Chapter21: International Cash Management
Section: Chapter Questions
Problem 3ST
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