Suppose the spot cadgbp exchange rate is 16647 the 1-year, Ask an Expert

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Suppose the spot CAD/GBP exchange rate is 1.6647, the 1-year continuously compounded rate in Canada is 7%. Suppose the 1-year futures exchange rate is 1.6660

(a) What is the interest rate prevailing in the UK?

(b) What is the 6-month futures exchange rate?

(c) Suppose the 6-month futures exchange rate is 1.870. Is there an arbitrage? If so, show how you can make a risk-free profit with a loan of 1 million.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92759508

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