What will your best arbitrageur strategy

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Reference no: EM131567999

Assume the following: spot rate AUD1.437=EUR1. 180 day forward rate AUD1.425=EUR1. AUD interest rate 3.5% p.a EUR interestet rate rate 4.5% p.a. As an arbitrageur (seeking a riskless profitable opportunity) you are aurthoriesed to use (borrow) either AUD 2miliilon or EUR 2 MILLION (rouned off to the nearest dollar EUR amount). What will your best arbitrageur strategy?

A. you should borrow EUR and invest in AUD and recive profit of EUR 7077.24

B. you should borrow AUD and invest in EUR and recive profit of EUR 7077.24

C. you should borrow EUR and invest in AUD and recive profit of EUR 7136.84

D. you should borrow AUD and invest in EUR and recive profit of EUR 7136.84

E. None of the above

Reference no: EM131567999

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