Exhibit 7-1 Assume the Following Information

question 59

Multiple Choice

Exhibit 7-1
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%
-Refer to Exhibit 7-1. 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:

Taxes

Compulsory financial charges or levies imposed by a government on its citizens to fund public expenditures.

Civilization

A complex human society characterized by the development of cities, social stratification, and a variety of cultural and technological advancements.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, indicating the percentage of an additional dollar of income that is paid in tax.

Progressive Tax

A tax system where the rate of taxation increases as the taxable income or amount increases, placing a higher burden on wealthier individuals.