Covered Interest Arbitrage Illustration 4


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Covered Interest Arbitrage Illustration 4

If Euro/USD Spot                  0.8125

Euro/USD                             0.8135       9 month forward

Euro Interest Rate 2.5% per annum

Dollar Interest Rate 2% per annum

Find Arbitrage possibilities.

(Ans.: Borrow USD, gain 2,498 USD per million)

 


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