question archive Sader is a foreign exchange dealer for a bank in Manchester
Sader is a foreign exchange dealer for a bank in Manchester
Subject:FinancePrice: Bought3
Sader is a foreign exchange dealer for a bank in Manchester. He has £2,000,000 (or its
Singapore dollar equivalent) for a short-term money market investment. He wonders if he
should invest in pounds sterling or make a covered interest arbitrage investment in the
Singapore dollar. He faces the following rates.
Spot exchange rate S$2.9880/£
3-month forward rate S$3.0000/£
3-month UK interest rate 3%p.a.
3-month Singapore interest rate 5%p.a.
Which country's money market do you recommend Sader to invest? Why? Calculate the arbitrage profit or loss in £?
