Assume Interest Rate Parity exists between the US and New Zeland and between the US and Canada. You also think that the International Fisher effect exists betweeen New Zeland and the US.

Spot Rates: Forward Rates: 1-year Junk Bond ETF rates:

$3NZD=$1USD $2.94NZD=$1USD New Zeland = 7%

$1.6CAD=$1USD US = 6%

Canada = 5%

Based on this information, what is the percentage return from these strategies:

1.- Invest in NZ (i.e., buy NZ Bonds) and sell a 1yr forward to cover your position. Was this a good strategy?

2.- Invest in NZ Bonds and do not cover your position.

3. - Invest in Canada if you think that the 1yr spot rate will be $1CAD=$0.61USD.

Also, using these quotes:

$1 Argentinian peso = $0.31 USD.

8 Chinese Yuan = $1 USD

2.5 Chinese Yuan = $1 Argentinian peso

4.- Show how you can make a profit from triangular arbitrage and what would your profit be if you invest $1,000,000 .