Assume the following information: Current spot rate of Australian dollar
=
$)64
Forecasted spot rate of Australian dollar 1 year from now
=
$)59
1-year forward rate of Australian dollar
=
$)62
Annual interest rate for Australian dollar deposit
=
9%
Annual interest rate in the United States
=
6%

Given the information in this question, the return from covered interest arbitrage by U.S. investors with $500,000 to invest is ____percent.
A) about 6.60
B) about 9.00
C) about 7.33
D) about 8.14
E) about 5.59

Question

Assume the following information: Current spot rate of Australian dollar
=
$)64
Forecasted spot rate of Australian dollar 1 year from now
=
$)59
1-year forward rate of Australian dollar
=
$)62
Annual interest rate for Australian dollar deposit
=
9%
Annual interest rate in the United States
=
6%
​
Given the information in this question, the return from covered interest arbitrage by U.S. investors with $500,000 to invest is ____percent.
A) about 6.60
B) about 9.00
C) about 7.33
D) about 8.14
E) about 5.59

Quizplus · Accepted Answer

The Answer of Assume the following information: Current spot rate of Australian dollar
=
$)64
Forecasted spot rate of Australian dollar 1 year from now
=
$)59
1-year forward rate of Australian dollar
=
$)62
Annual interest rate for Australian dollar deposit
=
9%
Annual interest rate in the United States
=
6%
​
Given the information in this question, the return from covered interest arbitrage by U.S. investors with $500,000 to invest is ____percent.
A) about 6.60
B) about 9.00
C) about 7.33
D) about 8.14
E) about 5.59

Assume the Following Information: Current Spot Rate of Australian Dollar