Opportunity for covered interest arbitrage

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Reference no: EM131825060

1. The one year interest rate is 6% on the euro and 2% on the yen. If the euro is selling at a 1-year forward discount of 3.25% against the yen, is there an opportunity for covered interest arbitrage?

Yes or No?

2. Abby W. deposits $75 per month into an account paying 9% interest for 2 years, t be used to purchase a car. The car she select costs more than the amount in the account. She agrees to pay $125 per month for 2 more years at 12% interest, and also uses a gift from her uncle of $375 as part of the down payment. What is the cost of the car to the nearest dollar?

Reference no: EM131825060

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