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The three-month interest rates in Sweden and the US are 8% and 4%, respectively. Suppose...

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Accounting

The three-month interest rates in Sweden and the US are 8% and 4%, respectively. Suppose that the spot price of the Swedish krona is $0.155.

(a) Calculate the forward price for delivery in 3 months? [5 marks]

(b) You are quoted a price of $0.156. Is there an arbitrage opportunity? If so, how

would you exploit it? [10 marks]

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