Covered Interest Arbitrage Illustration 7
Given the following data:
Spot rate 42.0010 = $ 1
6 month forward rate . 42.8020 = $ 1
Annualized interest rate on 6 month rupee 12 percent
Annualized interest rate on 6 month dollar 8 percent
Calculate the arbitrage possibilities. (Oct. 2004)
(Ans.: Borrow Foreign ($) and Invest Home (INR), Gain 164)
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