Suppose That the Annual Interest Rate Is 5

question 10

Multiple Choice

Suppose that the annual interest rate is 5.0 percent in the United States and 3.5 percent in Germany, and that the spot exchange rate is $1.12/€ and the forward exchange rate, with one-year maturity, is $1.16/€. Assume that an arbitrager can borrow up to $1,000,000 or €892,857 (which is the equivalent of $1,000,000 at the spot exchange rate of $1.12/€) .
-Covered interest arbitrage would not be possible if the forward rate would be:

• A) $1.1093/€.
• B) $1.1248/€.
• C) $1.1362/€.
• D) $1.1611/€.

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Definitions:

Intrapersonal World

The inner self of an individual, encompassing their thoughts, feelings, beliefs, and personal experiences.

Eigenwelt

A term, often used in existential psychology, referring to the individual's own personal experience or subjective world.

Responsibility

The state or fact of having a duty to deal with something or of having control over someone.

Willing

Displaying readiness or being inclined towards undertaking a specific action or embracing a particular idea.