Suppose one-year US Treasury bill pays 2.28% and one-year Canadian Treasury bill pays 0.95%. The current spot exchange rate is 1 US dollar (USD) = 1.2771 Canadian dollar (CAD) and the one-year forward exchange rate is 1 USD = 1.2273 CAD. How much arbitrage profit can an investor earn on an investment value of CAD 1 million? Answer: CAD
Suppose one-year US Treasury bill pays 2.28% and one-year Canadian Treasury bill pays 0.95%. The current spot exchange rate is 1 US dollar (USD) = 1.2771 Canadian dollar (CAD) and the one-year forward exchange rate is 1 USD = 1.2273 CAD. How much arbitrage profit can an investor earn on an investment value of CAD 1 million? Answer: CAD
Chapter7: International Arbitrage And Interest Rate Parity
Section: Chapter Questions
Problem 42QA
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