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One-year forward exchange rate

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The annual interest rate in the U.S. is 3.0 percent. The annual interest rate in Germany is 9 percent. The spot exchange rate is $1.25/€1 and the one-year forward exchange rate is $1.20/€1. How much can an investor earn on a covered interest arbitrage of $1,000,000?

  • $21,964
  • $5,417
  • $10,690
  • $16,400
  • None of the options.

Reference no: EM132398436

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