Assume the following information:
You have $400,000 to invest:
$$\begin{array}{l}
\text { You have } \$ 400,000 \text { to invest: }\
\begin{array} { l l r }
\text { Current spot rate of Sudanese dinar (SDD) } & = & \$ .00570 \
\text { 90-day forward rate of the dinar } & = & \$ .00569 \
\text { 90-day interest rate in the U.S. } & = & 4.0 \% \
\text { 90-day interest rate in Sudan } & = & 4.2 \%
\end{array}
\end{array}$$
If you conduct covered interest arbitrage, what amount will you have after 90 days?

Question

Assume the following information:
You have $400,000 to invest:
$$\begin{array}{l}
\text { You have } \$ 400,000 \text { to invest: }\
\begin{array} { l l r } 
\text { Current spot rate of Sudanese dinar (SDD) } & = & \$ .00570 \
\text { 90-day forward rate of the dinar } & = & \$ .00569 \
\text { 90-day interest rate in the U.S. } & = & 4.0 \% \
\text { 90-day interest rate in Sudan } & = & 4.2 \%
\end{array}
\end{array}$$
If you conduct covered interest arbitrage, what amount will you have after 90 days?

Quizplus · Accepted Answer

To conduct covered interest arbitrage, convert USD to SDD at the spot rate, invest in Sudan at 4.2% for 90 days, and convert back to USD using the forward rate. The calculation yields approximately $416,068.77.

Assume the Following Information: You Have $400,000 to Invest If You Conduct Covered Interest Arbitrage, What Amount Will You

Assume the Following Information:
You Have $400,000 to Invest If You Conduct Covered Interest Arbitrage, What Amount Will You