arbitrage profit can an investor earn on an investment value

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Suppose one-year German Treasury bill pays 4.34% and one-year
Canadian Treasury bill pays 3%. The current spot exchange rate is
1 Euro (EUR) = 1.3581 Canadian dollar (CAD) and the one-year
forward exchange rate is 1 EUR = 1.3238 CAD. How much
%3D
arbitrage profit can an investor earn on an investment value of CAD
3 million?
Transcribed Image Text:Suppose one-year German Treasury bill pays 4.34% and one-year Canadian Treasury bill pays 3%. The current spot exchange rate is 1 Euro (EUR) = 1.3581 Canadian dollar (CAD) and the one-year forward exchange rate is 1 EUR = 1.3238 CAD. How much %3D arbitrage profit can an investor earn on an investment value of CAD 3 million?
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