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After having learned everything about parlty conditions and CIRP, you decide to investigate whether there are arbitrage opportunities you can exploit by investing in various
After having learned everything about parlty conditions and CIRP, you decide to investigate whether there are arbitrage opportunities you can exploit by investing in various foreign markets, You observe the following 6-month annualized interest rates and exchange rates: 14% interest in Australia 4.2% interest in Sri Lanka Spot exchange rate: LKR176/AUD 6-month forward exchange rate: LKR122.9/AUD Is there an arbitrage opportunity? If so, where would you invest? Assume interest is calculated on a monthly basis and is not compounded O a. The AUD return from investing in Australia is 7.00% and the AUD return from investing in Sri Lanka is 79.29%; we should invest in Australia O b. The AUD returi trom Investing in Australia is 2.00% and the AUD return from investing in Sri Lanka is 46.21%, we should invest in su Lanka c. The AUD return from Investing in Australia is 700% and the AUD return from investing in Sri Lanka is 2.00%; we should invest in Sri Lanka O d. The AUD return from investing in Australia is 2.10% and the AUD return from Investing in Sri Lanka is 46.27%we should invest in Australia o e The AUD return from investing in Australia is 2.10% and the AUD return from investing in Sri Lanka is 53,23%, we should invest in Sri Lanka
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