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Assume the following information: Current spot rate of Australian dollar = $.72 Forecasted spot rate of Australian dollar 1 year from now = $.75 1-year

Assume the following information:

Current spot rate of Australian dollar = $.72

Forecasted spot rate of Australian dollar 1 year from now = $.75

1-year forward rate of Australian dollar = $.74

What is your percentage return from covered interest arbitrage with $100,000 for one year?

Annual interest rate for Australian dollar deposit = 3%

Annual interest rate in the U.S. = 1%

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