22 Covered interest arbitrage in both directions. The following information is available: l You have 500 000

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22 Covered interest arbitrage in both directions.

The following information is available:

l You have £500 000 to invest.

l The current spot rate of the Moroccan dirham is

£0.06.

l The 60-day forward rate of the Moroccan dirham is £0.05.

l The 60-day interest rate in the United Kingdom is 1%.

l The 60-day interest rate in Morocco is 2%.

a What is the yield to a UK investor who conducts covered interest arbitrage?

Did covered interest arbitrage work for the investor in this case?

b Would covered interest arbitrage be possible for a Moroccan investor in this case?

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ISBN: 9780324395464

4th Edition

Authors: Robert L. Sexton

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Question Posted: Oct 28, 2024 05:01 AM

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22 Covered interest arbitrage in both directions. The following information is available: l You have 500 000

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