In London, interest paid on pounds is 1.11%. In New york, interest paid on dollars is...

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In London, interest paid on pounds is 1.11%. In New york,interest paid on dollars is 3.27%. The Spot rate is $1.5512/ pound.The One year forward rate is $1.5529/ Pound. The spread onborrowing & lending rates is zero. The bid ask spread is Zero.The arbitrageur has no money of his own but can borrow up to1,000,000 of any local currency. A. what is the covered yield ondollars( if the investor borrows pounds in London) and coveredyield on pounds( if the investor borrows dollars in New york) B.Identity the steps and timing of this covered interest arbitrage,and compute the amounts involved at each state (including the gainat the end). C. The ROA is very low. How does an arbitrageur createacceptable ROE from covered interest arbitrage?

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A what is the covered yield on dollars if the investor borrows pounds in London and covered yield on pounds if the investor borrows dollars in New york Please see the table below Parameter Unit Value Linkage Amount Borrowed Pounds 1000000 A spot rate Pound 15512 B Amount in 1551200 C A x B Interest rate on 327 D Maturity amount after a year 1601924 E C x 1 D One year forward rate Pound 15529 F Maturity amount in Pounds See Answer

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In London, interest paid on pounds is 1.11%. In New york,interest paid on dollars is 3.27%. The Spot rate is $1.5512/ pound.The One year forward rate is $1.5529/ Pound. The spread onborrowing & lending rates is zero. The bid ask spread is Zero.The arbitrageur has no money of his own but can borrow up to1,000,000 of any local currency. A. what is the covered yield ondollars( if the investor borrows pounds in London) and coveredyield on pounds( if the investor borrows dollars in New york) B.Identity the steps and timing of this covered interest arbitrage,and compute the amounts involved at each state (including the gainat the end). C. The ROA is very low. How does an arbitrageur createacceptable ROE from covered interest arbitrage?