Assume the following information:
You have $1,000,000 to invest:
Current spot rate of pound
=
$1)30
90-day forward rate of pound
=
$1)28
3-month deposit rate in United States
=
3%
3-month deposit rate in Great Britain
=
4%

If you use covered interest arbitrage for a 90-day investment, what will be the amount of U.S. dollars you will have after 90 days?
A) $1,024,000
B) $1,030,000
C) $1,040,000
D) $1,034,000
E) None of these are correct.

Question

Assume the following information: ​
You have $1,000,000 to invest:
Current spot rate of pound
=
$1)30
90-day forward rate of pound
=
$1)28
3-month deposit rate in United States
=
3%
3-month deposit rate in Great Britain
=
4%
​
If you use covered interest arbitrage for a 90-day investment, what will be the amount of U.S. dollars you will have after 90 days?
A) $1,024,000
B) $1,030,000
C) $1,040,000
D) $1,034,000
E) None of these are correct.

Quizplus · Accepted Answer

The Answer of Assume the following information: ​
You have $1,000,000 to invest:
Current spot rate of pound
=
$1)30
90-day forward rate of pound
=
$1)28
3-month deposit rate in United States
=
3%
3-month deposit rate in Great Britain
=
4%
​
If you use covered interest arbitrage for a 90-day investment, what will be the amount of U.S. dollars you will have after 90 days?
A) $1,024,000
B) $1,030,000
C) $1,040,000
D) $1,034,000
E) None of these are correct.

Assume the Following Information: ​

Assume the Following Information: