Question

The EUR/USD spot quote on the interbank market is 1.2940/43.
Euroland interest rates are 2.060/2.125% and US interest rates are
1.464/1.766%. Using this information and round-trip transactions,
calculate the range of bid-offer quotes that ensure no arbitrage
opportunities exist over a 3-month (92-day) period. Explain how you
arrived at your answer. (For calculation purposes, assume 360 days
in the financial year.)

Answer 1