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5) (6 pts) Covered Interest Arbitrage. Assume the following information: Ouoted Price Spot rate of Canadian dollar 90-day forward rate of Canadian dollar 90-day Canadian

image text in transcribed 5) (6 pts) Covered Interest Arbitrage. Assume the following information: Ouoted Price Spot rate of Canadian dollar 90-day forward rate of Canadian dollar 90-day Canadian interest rate (periodic) 90-day U.S. interest rate (periodic) $.82 $.83 1.1% per 90 days 1.5% per 90 days Given this information, what would be the yield (percentage return) to a U.S. investor who used covered interest arbitrage? (Assume the investor invests $100,000.) What market forces would occur to eliminate any further possibilities of covered interest arbitrage

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