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Suppose that the annual interest rate is 2% in the US and 4% in Germany, and that the spot exchange rate is $1.15/€ and the 1-year forward exchange rate is $1.12/€. Assume that an arbitrageur based in the US can borrow up to $1,000,000 or €850,000, how much guaranteed US-dollar profit can the arbitrageur earn? O About $9,000. O About $13,000. O About $11,000. About $7,000.

Suppose that the annual interest rate is 2% in the US and 4% in Germany, and that the spot exchange rate is $1.15/€ and the 1-year forward exchange rate is $1.12/€. Assume that an arbitrageur based in the US can borrow up to $1,000,000 or €850,000, how much guaranteed US-dollar profit can the arbitrageur earn? O About $9,000. O About $13,000. O About $11,000. About $7,000.

Essentials Of Investments
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 that the annual interest rate is 2% in the US and 4% in Germany, and that the spot exchange rate is $1.15/€ and the 1-year forward exchange rate is $1.12/€. Assume that an arbitrageur based in the US can borrow up to $1,000,000 or €850,000, how much guaranteed US-dollar profit can the arbitrageur earn? O About $9,000. O About $13,000. O About $11,000. About $7,000.
Transcribed Image Text:Suppose that the annual interest rate is 2% in the US and 4% in Germany, and that the spot exchange rate is $1.15/€ and the 1-year forward exchange rate is $1.12/€. Assume that an arbitrageur based in the US can borrow up to $1,000,000 or €850,000, how much guaranteed US-dollar profit can the arbitrageur earn? O About $9,000. O About $13,000. O About $11,000. About $7,000.
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