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A foreign exchange trader can invest US$10 million, or the foreign currency equivalent in a covered interest arbitrage. Using the following quotes, should the trader

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A foreign exchange trader can invest US$10 million, or the foreign currency equivalent in a covered interest arbitrage. Using the following quotes, should the trader make a covered interest arbitrage and if so, how much would be the dollar return? Arbitrage Funds available $10,000,000 Spot exchange rate (CA$/US$) 1.257 100-day forward rate (CA$/US$) 1.259 100-day US dollar interest rate 1.50% 100-day Canada interest rate 1.75% O No; $0 O Yes; $158,836.38 Yes; $191,189.34 Yes; $64,599.35 Yes; $32,648.27

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