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International Economics 13th Edition by Robert Carbaugh
Edition 13ISBN: 978-1439038949International Economics 13th Edition by Robert Carbaugh
Edition 13ISBN: 978-1439038949 Exercise 11
Suppose the interest rate (on an annual basis) on three-month Treasury bills is 10 percent in London and 6 percent in New York, and the spot rate of the pound is $2.
a. How can a U.S. investor profit from uncovered interest arbitrage?
b. If the price of the three-month forward pound is $1.99, will a U.S. investor benefit from covered interest arbitrage? If so, by how much?
a. How can a U.S. investor profit from uncovered interest arbitrage?
b. If the price of the three-month forward pound is $1.99, will a U.S. investor benefit from covered interest arbitrage? If so, by how much?
Explanation
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Suppose the interest rate on three-month...
International Economics 13th Edition by Robert Carbaugh
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