Answer to Question #158959 in Finance for H

Question #158959

Agri Bank (South Africa) took up a Eurocurrency loan of US$1 000 000 for 180 days at 2.50% per

annum from Naomigroup, Washington, United States of America. The spot exchange rate ZAR/US$

= 17.27, the 180-day forward exchange rate ZAR/US$ = 17.33, and the Rand 180-day interest rate

is 6% per annum.

Calculate the potential profit that Agri Bank stands to make if an arbitrage opportunity is used to

maximise profits. (Assume a 360-day count and round off your answers to the nearest rand.

Expert's answer
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