IE 420 – 3-month LIBOR rates for Euro and USD are 4.75% and 5.70%
January 5th, 2018
3-month LIBOR rates for Euro and USD are 4.75% and 5.70%, respectively, with continuouscompounding. The current exchange rate between Euro and USD is 1.41 USD/EUR. The 3-month forward pricefor Euro quoted by a bank is 1.40 USD/EUR. What arbitrage opportunity does this create?