Covered Interest Arbitrage Illustration 8
Spot rate 1.8528 USD per Pound
6 months forward 1.8538 USD per Pound
Interest Rates: USA 4% p.a. Britain 3% p.a.
Workout arbitrage possibilities. (April 2005)
(Ans.: Borrow Foreign (Pound £) and Invest Home (USD), Gain 4,449)
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