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Calculate the profits after six-months

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Reference no: EM132667718

Assume that you have the following information:

Spot Rate:1.56 CAD/1 EURSix-month Forward Exchange Rate:

1.61 CAD/1 EUR

One-Year CAD Interest Rate:

0.30 % annually

One-Year EUR Interest Rate:

-0.42 % annually

CAD: Canadian Dollar

EUR: Euro

Is covered interest arbitrage worthwhile? If so, calculate the profits after six-months, assuming that you have 3,500 CAD. What else might you do to maximize profits if the covered interest arbitrage is worthwhile (explain in words)?

Reference no: EM132667718

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