You observe the following quoted money market rates: Spot exchange rate 95-day Forward exchange rate 95-day USD interest rate 95-day AUD interest rate a. -USD 361,605.85 O b. -USD 352,934.10 O c. -USD 272,802.68 What will your profit (in USD) be 95 days from now if you borrow USD3 million today and invest in Australia and then convert back to USD? In your calculations assume 360 days per year. O d. -USD322,300.31 Bid AUD1.185/USD AUD1.341/USD 5.57% p.a. 7.71% p.a. e. Ask AUD1.189/USD AUD1.349/USD 6.38% p.a. 8.81% p.a. None of the options in this question.
You observe the following quoted money market rates: Spot exchange rate 95-day Forward exchange rate 95-day USD interest rate 95-day AUD interest rate a. -USD 361,605.85 O b. -USD 352,934.10 O c. -USD 272,802.68 What will your profit (in USD) be 95 days from now if you borrow USD3 million today and invest in Australia and then convert back to USD? In your calculations assume 360 days per year. O d. -USD322,300.31 Bid AUD1.185/USD AUD1.341/USD 5.57% p.a. 7.71% p.a. e. Ask AUD1.189/USD AUD1.349/USD 6.38% p.a. 8.81% p.a. None of the options in this question.
Chapter7: International Arbitrage And Interest Rate Parity
Section: Chapter Questions
Problem 49QA
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