The spot exchange rate is $0.19 per Brazilian real in American terms. Assume interest rates are continuously compounded. A US dollar invested in Treasury bonds grows to $1.019 after 90 days. A real invested in risk-free Brazilian government Treasury securities grows to 1.010 reals at the end of the same time period. A broker offers to trade a ninety-day forward contract to buy or sell 1 million reals at the exchange rate of $0.19 per real. The arbitrage profit in US dollar that you can make today by trading one forward and other securities is equal to [round to a dollar amount, i.e. 7523 for an arbitrage profit of 7523.42]

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
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The spot exchange rate is $0.19 per Brazilian real in American terms. Assume interest
rates are continuously compounded. A US dollar invested in Treasury bonds grows to
$1.019 after 90 days. A real invested in risk-free Brazilian government Treasury
securities grows to 1.010 reals at the end of the same time period. A broker offers to
trade a ninety-day forward contract to buy or sell 1 million reals at the exchange rate
of $0.19 per real. The arbitrage profit in US dollar that you can make today by trading
one forward and other securities is equal to (round to a dollar amount, i.e. 7523 for an
arbitrage profit of 7523.42]
Transcribed Image Text:The spot exchange rate is $0.19 per Brazilian real in American terms. Assume interest rates are continuously compounded. A US dollar invested in Treasury bonds grows to $1.019 after 90 days. A real invested in risk-free Brazilian government Treasury securities grows to 1.010 reals at the end of the same time period. A broker offers to trade a ninety-day forward contract to buy or sell 1 million reals at the exchange rate of $0.19 per real. The arbitrage profit in US dollar that you can make today by trading one forward and other securities is equal to (round to a dollar amount, i.e. 7523 for an arbitrage profit of 7523.42]
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