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 U.S.= 6%
Given the information in this question,the return from covered interest arbitrage by U.S.investors with $500,000 to invest is _______%.
A) about 6.00
B) about 9.00
C) about 7.33
D) about 8.14
E) about 5.59
Correct Answer:
Verified
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