You have the following financial market information. You also have 1.88 million Australian dollar (A$) or 3.14 million Thai baht (THB) to make a profit due to covered interest arbitrage (CIA). Calculate the profit in A$ or THB if the CIA opportunity exists in the market. (enter the whole number without sign and symbol) Bid price Ask price A$0.0464 A$0.0682 THB spot rate THB one-year forward rate A$0.0425 A$0.0634 A$ spot rate THB22.4037 THB24.2606 A$ one-year forward rate THB27.6528 THB29.6897 Deposit rate Loan rate Interest rate on A$ 2.70% 4.58% Interest rate on THB 6.98% 8.23%

International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 27QA
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You have the following financial market information. You also have 1.88 million Australian dollar (A$) or 3.14 million Thai baht (THB)
to make a profit due to covered interest arbitrage (CIA). Calculate the profit in A$ or THB if the CIA opportunity exists in the
market. (enter the whole number without sign and symbol)
Bid price
Ask price
A$0.0464
A$0.0682
THB spot rate
THB one-year forward rate
A$0.0425
A$0.0634
A$ spot rate
THB22.4037 THB24.2606
A$ one-year forward rate
THB27.6528 THB29.6897
Deposit rate Loan rate
Interest rate on A$
2.70%
4.58%
Interest rate on THB
6.98%
8.23%
Transcribed Image Text:You have the following financial market information. You also have 1.88 million Australian dollar (A$) or 3.14 million Thai baht (THB) to make a profit due to covered interest arbitrage (CIA). Calculate the profit in A$ or THB if the CIA opportunity exists in the market. (enter the whole number without sign and symbol) Bid price Ask price A$0.0464 A$0.0682 THB spot rate THB one-year forward rate A$0.0425 A$0.0634 A$ spot rate THB22.4037 THB24.2606 A$ one-year forward rate THB27.6528 THB29.6897 Deposit rate Loan rate Interest rate on A$ 2.70% 4.58% Interest rate on THB 6.98% 8.23%
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