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How much arbitrage profit or loss can the trader make

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Reference no: EM132634787

The spot exchange rate is SGD 2.6898/USD and the 1-year forward exchange rate is SGD 2.4996/USD. The interest rate in Singapore is 7.78% p.a. and the interest rate in the United states is 4.93% p.a. A trader has USD 1,800,000 (or its SGD equivalent) in hand and he can precisely forecast the spot rate in one year at SGD2.7629/USD. How much arbitrage profit or loss can the trader make from engaging in a carry trade?

Reference no: EM132634787

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