2.a: Explain the concept of covered interest arbitrage and the scenario necessary for it to be plausible?

b:Assume the following information:

Quoted Price

Spot rate of Canadian dollar PKR 80 90 day forward rate of Canadian dollar PKR 79

90 day Canadian interest rate 9% 90 day Pakistan interest rate 6.5%

Given this information, what would be the yield (percentage return) to a Pakistani investor who used covered interest arbitrage?(Assume the investor invests PKR 100 Millions.) What market forces would occur to eliminate any further possibilities of covered interest arbitrage?Immersive Reader