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What is the arbitrage profit in one year

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Reference no: EM131697190

Suppose the annual interest rate is 1.5% in the US and 3% in Germany, and that the spot exchange rate is $1.57/€ and the forward exchange rate, with one-year maturity, is $1.58/€. Assume that an arbitrager can borrow up to $1,000,000 or €625,000. If an astute trader finds an arbitrage, what is the arbitrage profit in one year?

A) €13,390

B) €10,262

C) €46,207

D) €21,561

Reference no: EM131697190

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