- Please Use The Following Information For This Question A Does Covered Interest Rate Parity Hold Just State Your An 1 (15.63 KiB) Viewed 30 times
your answer – no explanation required.)
(b) To earn profits via covered interest arbitrage, would you
borrow in euros and lend in US$, or borrow in US$ and lend in
euros? (Just state your answer – no explanation required.)
(c) Suppose you are a German investor who cares about profits
measured in euros. You can either borrow €1,000,000 or $1,250,000
for one year, what is the profit you can earn via covered interest
arbitrage?
(d) In response to investors carrying out covered interest
arbitrage, will i$ increase or decrease? (Just state your
answer – no explanation required.)
Exchange Rate Interest Rate Annual % is S($/€) F360($/€) $1.25/€ $1.20/€ 2% 5%