Marutham & Co. concentrates on interest rate differentials of two currencies, as it is referred to cover interest arbitrage. Find out the arbitrage gain of Marutham & Co. Marutham & Co. concentrates in forwar

Calculation of Arbitrage gain of Marutham & Co. Interest rate differentials = 9% - 5% = 4% Convert ₹10 Million into British £ at spot rate = ₹10,000,000 / 78.10 = £128,040.9731 Interest = £128,040.9731 * (3/12) * 0.09 = £2,880.9219 Amount available for arbitrage = £128,040.9731 + £2,880.9219 = £130,921.8950 Sell at the end of 3 month = £130,921.8950 * ₹78.60 = ₹10,290,460.94 Amount borrowed with interest without arbitrage Actual Borrow = ₹10,000,000 Interest ₹10,000,000 * (3/12) * 0.05 = ₹125,000 Total amount without arbitrage = ₹10,125,000 Net arbitrage gain for Marutham & Co. = ₹10,290,460.94 - ₹10,125,000.00 = ₹165,460.94