Question
. Assume the following information: Current spot rate of Australian dollar = $.67 Forecasted spot rate of Australian dollar 1 year from now = $.68
. Assume the following information:
| Current spot rate of Australian dollar | = | $.67 |
| Forecasted spot rate of Australian dollar 1 year from now | = | $.68 |
| 1-year forward rate of Australian dollar | = | $.93 |
| Annual interest rate for Australian dollar deposit | = | 4% |
| Annual interest rate in the U.S. | = | 2% |
What is your percentage return from covered interest arbitrage with $550,000 for one year?
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Entrepreneurial Finance
Authors: Steven Rogers
4th Edition
1260461440, 978-1260461442
