5. The spot exchange rate for US dollars in Euros is €0.74 and the six-month forward rate is €0.73. The six month contin

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5. The spot exchange rate for US dollars in Euros is €0.74 and the six-month forward rate is €0.73. The six month contin

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5 The Spot Exchange Rate For Us Dollars In Euros Is 0 74 And The Six Month Forward Rate Is 0 73 The Six Month Contin 1
5 The Spot Exchange Rate For Us Dollars In Euros Is 0 74 And The Six Month Forward Rate Is 0 73 The Six Month Contin 1 (111.45 KiB) Viewed 49 times
5. The spot exchange rate for US dollars in Euros is €0.74 and the six-month forward rate is €0.73. The six month continuously-compounded interest rate for US dollar accounts is 5% per annum whereas the six month continuously-compounded interest rate of Euro- currency accounts is 1.5% per annum. Explain how a dealer bank can earn a risk-free arbitrage profit in this situation.
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