Can you generate arbitrage profits?

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Reference no: EM13153860

Suppose that the current spot exchange rate is USD/SKR6.25 and the three-month forward exchange rate is USD/SKR6.28. The three-month interest rate is 5.6% per annum in the U.S. and 8.8% per annum in Sweden. Assume that you can borrow up USto $1,000,000 or SKR 6,250,000. Can you generate arbitrage profits? Show your profits both in USD and SKR terms.

Reference no: EM13153860

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