Determine there is an arbitrage opportunity

Reference no: EM133290921

Question: At present, the dollar is trading against the British pound at spot GBP/USD = 1.1517, and at one-year (365-day) forward at 64 forward points. One-year (360- day) eurodollar deposits for the U.S. dollar is 5.39%, while half-year (180-day) eurosterling is 4.11%. Using the covered interest parity condition, determine if: (a) there is an arbitrage opportunity (hint: be sure to pay attention to the difference between the tenor of the forward versus that of deposits);

Reference no: EM133290921

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