One Year U

question 6

Multiple Choice

One year U.S.interest rates are 5% and European interest rates are 7%.The spot euro direct exchange rate quote is 1.32 and the one year forward rate direct quote is 1.35.If you have $1 million dollars or € 1 million to start with what would be your dollar profits from an interest arbitrage based on this data?

• A) $94,322
• B) $55,345
• C) $44,318
• D) $33,595

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Definitions:

High Concentration

A condition where a substance exists in a large amount relative to its volume or area, often relevant in chemical solutions.

Low Concentration

A term describing a solution that contains a relatively small amount of solute compared to the solvent.

Midsagittal

Anatomical term that refers to the plane that runs lengthwise down the midline of the body, dividing it into equal left and right halves.

Sagittal

Relating to or denoting an anatomical plane that divides the body into right and left parts.