A Trader Has $1 Million Available for Exploiting an Arbitrage

question 28

Multiple Choice

A trader has $1 million available for exploiting an arbitrage opportunity. Given the following information, determine if such an opportunity exists and if so, the maximum amount of profit that can be made by utilizing the $1 million. Ignore all trading costs and taxes.
S₀ = *87
F₁ = *84 (1-year forward)
R_CDN = 5%
R_S = 3%

• A) -$54,333
• B) -$20,000
• C) $5,667
• D) $16,785
• E) $31,034

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Definitions:

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The branch of medicine focused on the digestive system and its disorders.

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A type of alternative medicine that emphasizes physical manipulation of the body's muscle tissue and bones.

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A medical doctor specializing in the diagnosis, treatment, and management of disorders and diseases related to the urinary system and male reproductive organs.

Neurologist

A medical doctor who specializes in diagnosing and treating disorders of the nervous system, including the brain and spinal cord.