Covered Interest Arbitrage Illustration 3
Given the following data:
Spot Rate: US$ 0.7890 = CAD {Canadian Dollar}
6 months forward rate US$ 0.7850 = CAD
Annualized interest rate on 6 months US$: 2.11 per cent
Annualized interest rate on 6 months CAD: 2.64 per cent
Calculate arbitrage possibilities.
(Ans.: Borrow CAD, gain 2,499 CAD per million)
3 Comments