Suppose Thomas Kempf can borrow or lend $10,000,000 or 10,000,000 for 4 months. The interest...
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Suppose Thomas Kempf can borrow or lend $10,000,000 or 10,000,000 for 4 months. The interest rates in U.S. dollars are 8.1-8.4% per annum and in euros are 6.0-6.3% per annum. The current spot rates are 0.75-0.76 /$, and the 4-month forward rates are 0.77-0.78 /$. What should he do and why? Explain and show calculations.
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