The Australian and New Zealand annualised interest rates are given as follows: AUD deposits/loan rate...
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The Australian and New Zealand annualised interest rates are given as follows: AUD deposits/loan rate of 710% - 7.50% and NZD deposit/loan rate of 6.80% - 7.25%. Trensor bank can borrow 5 million AUD and believes that there is a possible arbitrage opportunity by investing into New Zealand money market. The spot exchange rate is AUD 0.48/NZD, and 90- day forward rate would be AUD 0.50/NZD. What is Trensor bank's Australian dollar profit as of today from the covered interest arbitrage transaction (i e. find the present value of the Australian dollar profit)? Select one: a. AUD 203,125 O b. AUD 199,387 c. AUD 5,093,750 d. AUD 5,199,387
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