Question
1)(5 pts) Covered Interest Arbitrage in Both Directions. The oneyear interest rate in New Zealand is 4 percent. The oneyear U.S. interest rate is 5.5
1)(5 pts) Covered Interest Arbitrage in Both Directions. The oneyear interest rate in New Zealand is 4 percent. The oneyear U.S. interest rate is 5.5 percent. The spot rate of the New Zealand dollar (NZ$) is $.60. The forward rate of the New Zealand dollar is $.615. Is covered interest arbitrage feasible for U.S. investors? Is it feasible for New Zealand investors? In each case, explain why covered interest arbitrage is or is not feasible.
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
