Multiple Choice
Suppose that the annual interest rate is 5.0 percent in the United States and 3.5 percent in Germany,and that the spot exchange rate is $1.12/€ and the forward exchange rate,with one-year maturity,is $1.16/€.Assume that an arbitrager can borrow up to $1,000,000.If an astute trader finds an arbitrage,what is the net cash flow in one year?
A) $10,690
B) $15,000
C) $46,207
D) $21,964.29
Correct Answer:
Verified
Correct Answer:
Verified
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