Week 5 1. Suppose that three-month interest rates in Australia are 7.66% for borrowing and 5.66% for lending and in New Zealand they are 8.63% for…

c)  Assuming no additional transaction costs, what percentage arbitrage profit could be generated (Calculate as a percentage of your initial borrowings)?

2.

Week 5

1. On August 16, the spot quotation on the pound was GBP / USD 1.9833 with the September futures contract closing at 1.9843. Yet on the 1st August the pound was valued at around GBP / USD 2.04. What do you think has happened to the price of the September pound futures contract over the month of August? Why?