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    Home Assignment 2

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    Shahnawaz Mirza
    Triangular arbitrage is possible based on the given exchange rates between the DM, $, and FF, which would allow buying one currency, exchanging it, and then exchanging it back for a profit. Covered interest arbitrage is feasible for US investors based on the 180 day forward rate of GBP being lower than implied by interest rate parity using the spot GBP rate and the interest rates in the UK and US.

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    Home Assignment 2

    Uploaded by

    Shahnawaz Mirza
    69 views1 page
    Triangular arbitrage is possible based on the given exchange rates between the DM, $, and FF, which would allow buying one currency, exchanging it, and then exchanging it back for a profit. Covered interest arbitrage is feasible for US investors based on the 180 day forward rate of GBP being lower than implied by interest rate parity using the spot GBP rate and the interest rates in the UK and US.

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    Triangular arbitrage is possible based on the given exchange rates between the DM, $, and FF, which would allow buying one currency, exchanging it, and then exchanging it back for a profit. Covered interest arbitrage is feasible for US investors based on the 180 day forward rate of GBP being lower than implied by interest rate parity using the spot GBP rate and the interest rates in the UK and US.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    69 views1 page

    Home Assignment 2

    Uploaded by

    Shahnawaz Mirza
    Triangular arbitrage is possible based on the given exchange rates between the DM, $, and FF, which would allow buying one currency, exchanging it, and then exchanging it back for a profit. Covered interest arbitrage is feasible for US investors based on the 180 day forward rate of GBP being lower than implied by interest rate parity using the spot GBP rate and the interest rates in the UK and US.

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    International Finance and Treasury Management Home Assignment 2 Submission date: 19 March 2012 Mode: Mail File Name

    (Most important): H2 last three digits of your Roll Number 01. Assume that the following spot exchange rates exist today; DM = $ .60 FF = $ .15 DM = FF 4 Assume no transaction costs. Based on these exchange rates, can triangular arbitrage be used to earn profit? Explain. 02. Assume the following information: Spot rate of GBP = $ 1.60 180 day forward rate of GBP = $ 1.56 180 day British interest rate = 4% 180 day US interest rate = 3% Based on the above information, is covered interest arbitrage by US investors feasible? Explain.

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