A Trader Has $1 Million Available for Exploiting an Arbitrage

question 341

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.[LINE][LINE]S0 =
¥87[LINE]F1 = ¥84 (1-year forward) [LINE]RCDN = 5%[LINE]RS = 3%

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

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Definitions:

Exclusive Possession

The right of an individual or entity to the use and control of property without interference from others, often associated with lease agreements.

Real Property

Land and anything permanently affixed to it, such as buildings, along with the rights of use and enjoyment that come with the land.

Relief Against Forfeiture

An equitable principle that when a landlord retakes a property because of a failure to pay rent prior to the end of the lease term, the tenant can pay the arrears and apply in the court to have the lease reinstated.

Distress

Intense anxiety, sorrow, or pain; in legal terms, it may refer to the seizure of property to compel payment or compliance.