Determine the profit-loss

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Suppose that the current EUR/GBP rate is 0.6673 and the one-year forward exchange rate is 0.6713. The one-year interest rate is 1.2% in euros and 3.5% in pounds. You can borrow at most €1,000,000 or the equivalent pound amount. Suppose you are a Euro-based investor. Determine the profit/loss (in EUR, no cents) if you borrow locally and invest in pounds

Reference no: EM133057545

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