Risk management and derivatives

Reference no: EM131510902

RISK MANAGEMENT AND DERIVATIVES

The treasurer of a large Canadian company has $ 30 million Canadian dollars to invest During three months. The effective monthly interest rate in Canada and Great Britain is 0.31% and 0.34%, respectively. The current exchange rate of £ 0.573 / $ 1 and the forward price (F0) of £ / $ for one Maturity of 3 months is £ 0.575 / $ 1. A) In which country should the treasurer invest the company's funds? (Further information: Ignore Transaction costs) B) Is there an opportunity for arbitration? If so, why and how can we benefit? If not, Why?

Reference no: EM131510902

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