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Explain the lending rate and the ask price

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Reference no: EM133069166

You observe the following information:

 

Bid

Ask

USDCAD spot

1.2468

1.2472

USDCAD 3-month forward

1.2420

1.2430

USD Eurocurrency 3-month rate (annualized)

2.00%

2.10%

CAD Eurocurrency 3-month rate (annualized)

3.65%

3.80%

Assume the bid price for interest rates is the lending rate and the ask price is the borrowing rate. Does an arbitrage opportunity exist and, if so, how much profit could you earn (to the nearest $10 or C$10) if you could borrow either $10,000 or C$10,000?

Group of answer choices

Yes, and the profit would be $70

Yes, and the profit would be C$90

Yes, and the profit would be $90

No, there is not an arbitrage opportunity

Reference no: EM133069166

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