QUESTION 2 Tunas Mekar Bhd has decided to venture into a new project with a UK based company. The capital required for t

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QUESTION 2 Tunas Mekar Bhd has decided to venture into a new project with a UK based company. The capital required for t

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QUESTION 2
Tunas Mekar Bhd has decided to venture into a new project with a UKbased company. The capital required for this project is £12 millionneeded in 6 months’ time. The company decides to borrow the amountand finds that the 6 months interest rate in UK is 3.50% and inMalaysia is 2.5%. At present the exchange rate is RM5.1630/£ andthe 6-months forward rate is RM5.1950/£. Based on the information,how much would the interest arbitrage profit (loss) be?
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