Covered Interest Arbitrage Illustration 11
Given:
Spot : 1 USD = SEK 5.8025
3 months forward : 1 USD = SEK 5.8975
USD interest rate : 4.20% p.a.
SEK interest rate : 6.00% p.a.
Identify and calculate interest rate arbitrage. (Oct. 2009)
(Ans.: Borrow Home and Gain SEK 12,044 on 1 million SEK)
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