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Profit from the pricing inconsistency

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One year interest rates are 9% respectively in the US and 7% respectively in Germany. The spot exchange rate for the US dollars is $1.4 to the EURO. The 12- month forward rate is $1.5

i) Suggest a way you might profit from the pricing inconsistency that is presented here, assuming you have do not have any initial investment funds and you need to borrow.

ii) Will the situation persist forever? Explain your answer.t

Reference no: EM132528323

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