The 1 year (lending or borrowing) rate in the UK is 8%; the 1 year (lending or borrowing) rate in the United States is 5%. Currently the spot exchange rate if $1.81 per British pound; the 1 year forward rate is $1.79 per British pound. If you are able to borrow $1,000,000 in the US to lend (as British pounds) in the UK, how much a risk free profit can you create over the next year? Give typing answer with explanation and conclusion
The 1 year (lending or borrowing) rate in the UK is 8%; the 1 year (lending or borrowing) rate in the United States is 5%. Currently the spot exchange rate if $1.81 per British pound; the 1 year forward rate is $1.79 per British pound. If you are able to borrow $1,000,000 in the US to lend (as British pounds) in the UK, how much a risk free profit can you create over the next year? Give typing answer with explanation and conclusion
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
Problem 1PS
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The 1 year (lending or borrowing) rate in the UK is 8%; the 1 year (lending or borrowing) rate in the United States is 5%. Currently the spot exchange rate if $1.81 per British pound; the 1 year forward rate is $1.79 per British pound. If you are able to borrow $1,000,000 in the US to lend (as British pounds) in the UK, how much a risk free profit can you create over the next year?
Give typing answer with explanation and conclusion
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