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Argosy University/ Phoniex University/
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Phoniex University
Oct-2001 - Nov-2016
4.13Â Â Â Â Currency exchange rates and Eurocurrency interest rates are as follows:
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Current Singapore dollar (S$) spot rate                  $0.50/S$ 1-year Singapore dollar (S$) forward rate $0.51/S$ 1-year Singapore dollar (S$) interest rate 4.0%
1-year U.S. interest rate                                                6.0%
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In what direction will covered interest arbitrage force the quoted rates to change? Explain the steps and compute the profit based on a $1 million initial position.
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