Ican 2026 Financial Management Question 4

Practice mixed question 4 from the 2026 Ican Financial Management examination.

Ican 2026 Financial Management Mixed
Question 4 ICAN • 2026 • FINANCIAL MANAGEMENT • mixed
Case Stimulus
You are a proprietary trader at a major Nigerian bank’s international finance desk, tasked with identifying risk-free arbitrage opportunities. You have gathered the following current market data: Current spot exchange rate ₦1,200/$1 1 – Year forward exchange rate ₦1,300/$1 1 – Year US risk-free Interest rate 2% 1 – Year Nigerian risk-free interest rate 10% The dealer is authorised to buy or sell up to US$ 500,000 per transaction.

Requirements

( a )
Briefly explain the concept of interest rate parity theorem
( b )
Show whether covered interest parity (CIP) hold in the data given
( c )
If there is an arbitrage opportunity, calculate the profit available to the dealer, at maturity. Show all calculations.
( d )
Why is the profit in (c), if any, considered risk-free?

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About This Question

This is Ican 2026 Financial Management Question 4. It is one of the mixed questions from the 2026 Ican Financial Management examination.

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