Suppose that 10-month interest rates in Canada and Europe are 3.2% and 1.3%, respectively. In addition, the exchange rate between CAD and euro is 1.3400 CAD per euro. If euro futures price is 1.4124 CAD per euro, how an arbitrager will earn the risk-free profit?
Suppose that 10-month interest rates in Canada and Europe are 3.2% and 1.3%, respectively. In addition, the exchange rate between CAD and euro is 1.3400 CAD per euro. If euro futures price is 1.4124 CAD per euro, how an arbitrager will earn the risk-free profit?
Chapter21: International Cash Management
Section: Chapter Questions
Problem 4ST
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Suppose that 10-month interest rates in Canada and Europe are 3.2% and 1.3%, respectively. In addition, the exchange rate between CAD and euro is 1.3400 CAD per euro. If euro futures price is 1.4124 CAD per euro, how an arbitrager will earn the risk-free profit?
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