In: Finance
Spot = $1.40/Euro
Forward180 day = $1.42/Euro
Alana can earn 5% interest per annum on a 1-year US government bond and 3% interest per annum on the equivalent French bond. Assuming Alana can sell either bond after six months for the same price she paid, excluding trading costs does Alana have an arbitrage opportunity and if so, approximately how much profit can she make?