ppose the spot price of a euro in dollars is $0.932. The U.S. interest rate for 90 days is 6.875% and the euro rate for 90 days is 4.450%. All interest calculations are done as rate times (#days/360). a. What is the rate for a 90-day forward contract on the euro? b. Suppose the euro forward contract is currently quoted at $0.95. What type of transaction(s) should an arbitrageur conduct to take advantage of the apparent mispricing
ppose the spot price of a euro in dollars is $0.932. The U.S. interest rate for 90 days is 6.875% and the euro rate for 90 days is 4.450%. All interest calculations are done as rate times (#days/360). a. What is the rate for a 90-day forward contract on the euro? b. Suppose the euro forward contract is currently quoted at $0.95. What type of transaction(s) should an arbitrageur conduct to take advantage of the apparent mispricing
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter27: Multinational Financial Management
Section: Chapter Questions
Problem 7MC
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Suppose the spot price of a euro in dollars is $0.932. The U.S. interest rate for 90 days is 6.875% and the euro rate for 90 days is 4.450%. All interest calculations are done as rate times (#days/360).
a. What is the rate for a 90-day forward contract on the euro?
b. Suppose the euro forward contract is currently quoted at $0.95. What
type of transaction(s) should an arbitrageur conduct to take
advantage of the apparent mispricing
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