Assume the following information:
$$\begin{array} { l l r }
\text { Current spot rate of Australian dollar } & = & \$ .64 \
\text { Forecasted spot rate of Australian dollar 1 year from now } & = & \$ .59 \
\text { 1-year forward rate of Australian dollar } & = & \$ .62 \
\text { Annual interest rate for Australian dollar deposit } & = & 9 \% \
\text { Annual interest rate in the U.S. } & = & 6 \%
\end{array}$$
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

Question

Assume the following information:
$$\begin{array} { l l r } 
\text { Current spot rate of Australian dollar } & = & \$ .64 \
\text { Forecasted spot rate of Australian dollar 1 year from now } & = & \$ .59 \
\text { 1-year forward rate of Australian dollar } & = & \$ .62 \
\text { Annual interest rate for Australian dollar deposit } & = & 9 \% \
\text { Annual interest rate in the U.S. } & = & 6 \%
\end{array}$$
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

Quizplus · Accepted Answer

The Answer of Assume the following information:
$$\begin{array} { l l r } 
\text { Current spot rate of Australian dollar } & = & \$ .64 \
\text { Forecasted spot rate of Australian dollar 1 year from now } & = & \$ .59 \
\text { 1-year forward rate of Australian dollar } & = & \$ .62 \
\text { Annual interest rate for Australian dollar deposit } & = & 9 \% \
\text { Annual interest rate in the U.S. } & = & 6 \%
\end{array}$$
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

Assume the Following Information Given the Information in This Question, the Return from Covered