# Arbitrage Opportunity Assignment | Homework For You |

The three-month dollar interest rate in New York is 3% per annum. Alternatively, the three-month euro interest rate in Frankfort is 5% p.a. The current \$/€ spot exchange rate is \$1.1340/€. The euro three-month forward rate is quoted at \$1.1326/€.
Show how a U.S. arbitrageur would exploit a possible covered interest arbitrage opportunity with a nominal \$80,000,000. Don’t start with the formula. Explain in your own words the transactions the arbitrageur would execute and calculate the profit/loss the arbitrager would make or face. Get Finance homework help today
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## Arbitrage Opportunity Assignment | Homework For You |

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# Arbitrage Opportunity Assignment | Homework For You |

The three-month dollar interest rate in New York is 3% per annum. Alternatively, the three-month euro interest rate in Frankfort is 5% p.a. The current \$/€ spot exchange rate is \$1.1340/€. The euro three-month forward rate is quoted at \$1.1326/€.
Show how a U.S. arbitrageur would exploit a possible covered interest arbitrage opportunity with a nominal \$80,000,000. Don’t start with the formula. Explain in your own words the transactions the arbitrageur would execute and calculate the profit/loss the arbitrager would make or face. Get Finance homework help today