Assume the Following Information

question 33

Multiple Choice

Assume the following information:
You have $300,000 to invest
The spot bid rate for the euro (€) is $1.08
The spot ask quote for the euro is $1.10
The 180-day forward rate (bid) of the euro is $1.08
The 180-day forward rate (ask) of the euro is $1.10
The 180-day interest rate in the U.S.is 6%
The 180-day interest rate in Europe is 8%
If you conduct covered interest arbitrage,what amount will you have after 180 days

• A) $318,109.10.
• B) $330,000.00.
• C) $312,218.20.
• D) $323,888.90.
• E) none of the above

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Definitions:

Quarterly Payments

Payments made every three months over the course of a year.

Present Value

The modern-day value of a potential future sum of money or sequence of financial inflows, accounting for a particular return rate.

Registered Education Savings Plan

A tax-advantaged savings account in Canada designed to help save for a child's post-secondary education.

Compounded Semi-annually

Involves calculating and adding interest to the principal amount of an investment or loan twice per year, leading to compound growth over time.