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How much will be the euro-denominated arbitrage pro?t

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An Italian currency dealer has good credit and can borrow €800,000 for one year. The one-year interest rate in the U.S. is i; = 2% and in the euro zone the one-year interest rate is i€ = 6%. The spot exchange rate is $1.25 = €1.00 and the one-year forward exchange rate is $1.20 = €1.00, How much will be the euro-denominated arbitrage pro?t?

Reference no: EM133070616

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