Suppose That the Annual Interest Rate Is 2

question 81

Multiple Choice

Suppose that the annual interest rate is 2.0 percent in the United States and 4 percent in Germany,and that the spot exchange rate is $1.60/€ and the forward exchange rate,with one-year maturity,is $1.58/€.Assume that an arbitrager can borrow up to $1,000,000 or €625,000.If an astute trader finds an arbitrage,what is the net cash flow in one year?

• A)$238.65
• B)$14,000
• C)$46,207
• D)$7,000

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Definitions:

Micro Variables

Small-scale factors that can affect a business or research outcome; often specific to a particular area or sector.

Demographic Variables

Characteristics of populations used in market research, such as age, gender, income, and education, to segment markets.

Global

Pertaining to or involving the entire world; often used in the context of businesses that operate internationally.

Consumer Behavior

The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society.