Covered Interest Arbitrage Illustration 10
USD 1 = EUR 0.7315 (Spot Rate)
3 months forward rate 0.7370
Annualized interest rate on EUR 7%
Annualized interest rate on USD 9%
Find if arbitrage gain is possible and calculate the gain for 1 million. (Oct. 2011)
(Ans.: Borrow Home and Gain EUR 12,688 on 1 million EUR)
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