Forex and Interest Rate Illustration 7
Exchange Rates:
Can $: 0.665/DM (Spot)
Can $: 0.670/DM (3 months)
Interest Rates:
DM: 7.00% per annum
Can $: 9.00% per annum
Calculate the arbitrage gain possible from the above data. (Mumbai University, April 2002)
(Ans.: Formula I – Positive, Can$ 2,650 on million. Formula II- Negative)
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