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Robert is considering an investment opportunity based on the information provided in the table below. Explain...

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Finance

Robert is considering an investment opportunity based on theinformation provided in the table below. Explain the steps she hasto undertake in order to earn a risk-free profit by engaging in aforward contract.

USD 6-month risk free rate2.45%
EUR 6-month risk free rate3.60%
EUR/USD Spot exchange rate1.1278
EUR/USD 6-month forward rate1.1480

Answer & Explanation Solved by verified expert
4.0 Ratings (751 Votes)
1 The 6 month forward premium for the USD 11480112781 179 2 Interest rate differential 360245 115 3 As the 6 month forward premium is not equal to the 6 month interest rate differential there is scope for covered    See Answer
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Robert is considering an investment opportunity based on theinformation provided in the table below. Explain the steps she hasto undertake in order to earn a risk-free profit by engaging in aforward contract.USD 6-month risk free rate2.45%EUR 6-month risk free rate3.60%EUR/USD Spot exchange rate1.1278EUR/USD 6-month forward rate1.1480

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