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:

Describing Behavior

The process of observing and recounting actions or responses of individuals or groups in a detailed and systematic manner.

Potential Employees

Individuals who have the possibility or suitability to be hired for a job but have not yet been employed by the organization.

Prediction

The act of forecasting or estimating future events or trends based on current or past data.

Stress-Reduction

Techniques or strategies used to decrease levels of stress and its impact on the body and mind.