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How much profit will you earn

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Reference no: EM132968999

Question - Assume the following information: You have $1,000,000 to invest Current spot rate of Pound = $1.30/£

90-day forward rate of Pound = $1.28/£

1-year deposit rate in U.S. = 2%

1-year deposit rate in Great Britain = 4%

Assuming no transaction costs, is there an arbitrage opportunity for a 90-day investment and if so, how much profit will you earn?

A. Yes; $6,000

B. There is no arbitrage opportunity

C. Yes; $24,000

D. Yes; $4,000

E. None of the above

Reference no: EM132968999

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