As location arbitrage occurs, Orleans Bank will increase its ask price while Kansas Bank reduces its bid price, causing a realignment of the exchange rates. 4. Covered Interest Arbitrage. Assume the following information: British pound spot rate = $1. 58 British pound one-year forward rate = $1. 58 British one-year interest rate = 11% U. S. One-year interest rate = 9% Explain how U. S. Investors ...
Case Studies: Finance, Foreign Exchange and Interest Rates
November 7, 2017 \ Finance \ 0 Comments