Question
Assume the following information: Current spot rate of New Zealand dollar Forecasted spot rate of New Zealand dollar six months from now Six month
Assume the following information: Current spot rate of New Zealand dollar Forecasted spot rate of New Zealand dollar six months from now Six month forward rate of the New Zealand dollar Six month interest rate on New Zealand dollars (annual rate) Six month interest rate on U.S. dollars (annual rate) = = = = = $.41 $.43 $.44 8% 9% 1. What are the potential profits in USD or NZD from interest rate arbitrage if you can start with 1,000,000 USD or 1,000,000 NZD?
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