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Author Question: You have equal amounts of money invested in a risk-free dollar-denominated investment and borrowed ... (Read 55 times)

bio_gurl

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Question 1

You can borrow $25,000 at 1% interest for 1 year. The exchange rate for Australia is 1.25AUS/1US. The Australian Treasury is offering 2.5% risk free investments. What is the total profit you can make in 1 year?
◦ $625
◦ $450
◦ $250
◦ $375
◦ $425

Question 2

You have equal amounts of money invested in a risk-free dollar-denominated investment and borrowed at the rate paid on the British pound. If you can earn a return during this, you have shown
◦ interest rate arbitrage.
◦ interest rate parity.
◦ purchasing power arbitrage.
◦ purchasing power parity.


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Marked as best answer by bio_gurl on Apr 25, 2021

bdobbins

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bio_gurl

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Reply 2 on: Apr 25, 2021
Thanks for the timely response, appreciate it


T4T

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Reply 3 on: Yesterday
:D TYSM

 

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