International Arbitrage n Covered interest arbitrage activity creates a relationships between spot rates, interest rates and forward rates n Borrow in country 1 n Convert the funds to currency for country 2 using the spot rate; buy forward contract for return n Invest in country 2 and earn an investment rate of return n Convert back to country 1 currency using forward contract, repay loan
{"Image DocumentName": "Background on Foreign Exchange Markets", "Image ImageDescription": "Exchange rates involve different kinds of quotes for comparing the value of the U.S. dollar to various foreign currencies. 1 unit of foreign currency worth some amount of U.S. dollars\u2014e.g.  .70 U.S. per Canadian Dollar. 1 U.S. dollar\u2019s value in terms of some amount of foreign currency\u2013 e.g. CD 1.43 per U.S. dollar. Note reciprocal relationship. Cross-exchange rates express relative values of two different foreign currencies per  1 U.S.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}