QUESTION 1 (10 MARKS) Currently, the spot rate is RM4.2000/USD and the one year forward rate is RM4.1000/USD. Interest r

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answerhappygod
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QUESTION 1 (10 MARKS) Currently, the spot rate is RM4.2000/USD and the one year forward rate is RM4.1000/USD. Interest r

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QUESTION 1 (10 MARKS)Currently, the spot rate is RM4.2000/USD and the one year forwardrate is RM4.1000/USD. Interest rate in United States is 3% perannum and in Malaysia is 2% per annum. Assume that you can borrowas much as USD100,000 or RM420,000 for your coming project. IfInterest Rate Parity (IRP) is not holding, determine how would youcarry out covered interest arbitrage (CIA) and compute theprofit.
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