much arbitrage profit can an investor earn on an investment value of CAD 2 million?
much arbitrage profit can an investor earn on an investment value of CAD 2 million?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Suppose one-year German Treasury bill pays 4.13% and one-year Canadian Treasury
%3!
bill pays 2.33%. The current spot exchange rate is 1 Euro (EUR) = 1.3598 Canadian
dollar (CAD) and the one-year forward exchange rate is 1 EUR = 1.3452 CAD. How
much arbitrage profit can an investor earn on an investment value of CAD 2 million?
Answer:
CAD
(DO NOT ROUND YOUR CALCULATIONS UNTIL YOU REACH THE FINAL
ANSWER. ENTER YOUR RESPONSE ROUNDED TO TWO DECIMAL PLACES,
AND NO SEPARATOR FOR THOUSANDS.)
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