Mr. Boris wants to engage in arbitration and earn riskless profit with an amount of 50,000.Six month's forward premium /discount for the currency pair USD/CAD is 1%. Determine the possibility for arbitration profit if the US interest rate is 3% and Canadian interest rate is 6%. a. Borrow 50,000 CAD at 6% interest and invest in USD at 3% interest b. Borrow 50,000 USD at 3% interest and invest in CAD at 6% interest c. No possibility to earn arbitrage profit with an amount of 50,000 in the given situation d. None of the option is correct

Mr. Boris wants to engage in arbitration and earn riskless profit with an amount of 50,000.Six month's forward premium /discount for the currency pair USD/CAD is 1%. Determine the possibility for arbitration profit if the US interest rate is 3% and Canadian interest rate is 6%. a. Borrow 50,000 CAD at 6% interest and invest in USD at 3% interest b. Borrow 50,000 USD at 3% interest and invest in CAD at 6% interest c. No possibility to earn arbitrage profit with an amount of 50,000 in the given situation d. None of the option is correct

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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