5. Covered Interest Arbitrage. The one-year interest rate in New Zealand is 6 percent. The one-year U.S. interest rate is 10 percent. The spot rate of the New Zealand dollar (NZ$) is $.50. The one-year forward rate of the New Zealand dollar is $.54.

a) Is covered interest arbitrage feasible for U.S. investors?

b) Is it feasible for New Zealand investors? In each case, explain why covered interest arbitrage is or is not feasible.