One year U.S.interest rates are 7% and European interest rates are 5%.The spot euro direct exchange rate quote is 1.30 and the one year forward rate direct quote is 1.25.If you have $1 million dollars or € 1 million to start with what would be your dollar profits from an interest arbitrage based on this data?
A) $60,384
B) $42,973
C) $68,422
D) $78,500
Correct Answer:
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