Determine the profit or loss if you borrow in pounds

Reference no: EM133331689

Question: Suppose that the current EUR/GBP rate is 0.6688 and the one-year forward exchange rate is 0.6749. The one-year interest rate is 1.6% in euros and 3.2% 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 in pounds and invest locally.

Reference no: EM133331689

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