Is this arbitrarge opportunity

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Reference no: EM131830354

Suppose that dealer A in New York offers to buy British pounds one year from now at a rate of dA = 1.58 dollars to a pound, while dealer B in London would sell British pounds immediately at a rate of d 1.60 dollars to a pound. Suppose further that dollars carn be borrowed at an annual rate of 4% and British pounds can be invested in a bank account at an annual rate of 6%. Is this an arbitrarge opportunity? If so, what would an investor's profit be if the investor borrowed $10,000? Justify your work.

Reference no: EM131830354

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