What will be profit as measured in eur

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Reference no: EM132055676

You are looking at the markets for THB (Thai bahts) and EUR. You observe that the bid/ask interest rates in Thailand are 20%/22%, and the bid/ask interest rates on the euro are 2%/4%. The spot exchange rate is 40.4 THB/EUR, and you expect that in the next 3 months (90 days) the exchange rate will not move much, moving to 42 THB/EUR.

Your borrowing capacity is 2 million EUR and 50 million THB.

Based on this information, you decide to borrow EUR at the relatively low rates, and invest in the higher THB rate. What will be your profit as measured in EUR?

Reference no: EM132055676

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