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much arbitrage profit can an investor earn on an investment value of CAD 2 million?

much arbitrage profit can an investor earn on an investment value of CAD 2 million?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Suppose one-year German Treasury bill pays 4.13% and one-year Canadian Treasury %3! bill pays 2.33%. The current spot exchange rate is 1 Euro (EUR) = 1.3598 Canadian dollar (CAD) and the one-year forward exchange rate is 1 EUR = 1.3452 CAD. How much arbitrage profit can an investor earn on an investment value of CAD 2 million? Answer: CAD (DO NOT ROUND YOUR CALCULATIONS UNTIL YOU REACH THE FINAL ANSWER. ENTER YOUR RESPONSE ROUNDED TO TWO DECIMAL PLACES, AND NO SEPARATOR FOR THOUSANDS.)
Transcribed Image Text:Suppose one-year German Treasury bill pays 4.13% and one-year Canadian Treasury %3! bill pays 2.33%. The current spot exchange rate is 1 Euro (EUR) = 1.3598 Canadian dollar (CAD) and the one-year forward exchange rate is 1 EUR = 1.3452 CAD. How much arbitrage profit can an investor earn on an investment value of CAD 2 million? Answer: CAD (DO NOT ROUND YOUR CALCULATIONS UNTIL YOU REACH THE FINAL ANSWER. ENTER YOUR RESPONSE ROUNDED TO TWO DECIMAL PLACES, AND NO SEPARATOR FOR THOUSANDS.)
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