Assume the following information:

Given the information in this question, the return from covered interest arbitrage by U.S. investors with $500,000 to invest is ____ percent.
Current spot rate of New Zealand dollar
=$)41
Forecasted spot rate of New Zealand dollar 1 year from now
=$)43
One-year forward rate of the New Zealand dollar
=$)42
Annual interest rate on New Zealand dollars
=8%
Annual interest rate on U.S. dollars
=9%
A)about 11.97
B)about 9.63
C)about 11.12
D)about 11.64
E)about 10.63

Question

Assume the following information:
​
Given the information in this question, the return from covered interest arbitrage by U.S. investors with $500,000 to invest is ____ percent.
Current spot rate of New Zealand dollar
=$)41
Forecasted spot rate of New Zealand dollar 1 year from now
=$)43
One-year forward rate of the New Zealand dollar
=$)42
Annual interest rate on New Zealand dollars
=8%
Annual interest rate on U.S. dollars
=9%
A)about 11.97
B)about 9.63
C)about 11.12
D)about 11.64
E)about 10.63

Quizplus · Accepted Answer

The Answer of Assume the following information:
​
Given the information in this question, the return from covered interest arbitrage by U.S. investors with $500,000 to invest is ____ percent.
Current spot rate of New Zealand dollar
=$)41
Forecasted spot rate of New Zealand dollar 1 year from now
=$)43
One-year forward rate of the New Zealand dollar
=$)42
Annual interest rate on New Zealand dollars
=8%
Annual interest rate on U.S. dollars
=9%
A)about 11.97
B)about 9.63
C)about 11.12
D)about 11.64
E)about 10.63

Assume the Following Information