Determining the net cash flow

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Reference no: EM13971538

Suppose that the annual interest rate is 2.0 percent in the United States and 4 percent in Germany, and that the spot exchange rate is $1.60/Ac‚¬ and the forward exchange rate, with one-year maturity, is $1.58/Ac‚¬. Assume that an arbitrager can borrow up to $1,000,000 or Ac‚¬625,000. If an astute trader finds an arbitrage, what is the net cash flow in one year?

Reference no: EM13971538

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