Question
Assume the following information: Current spot rate of New Zealand dollar = $.41 Forecasted spot rate of New Zealand dollar 1 year from now =
Assume the following information:
| Current spot rate of New Zealand dollar | = | $.41 |
| Forecasted spot rate of New Zealand dollar 1 year from now | = | $.43 |
| One-year forward rate of the New Zealand dollar | = | $.42 |
| Annual interest rate on New Zealand dollars | = | 8% |
| Annual interest rate on U.S. dollars | = | 9% |
Given the information in this question, the return from covered interest arbitrage by U.S. investors with $500,000 to invest is ____.
| about US$ 163,341 | ||
| about NZ$ 163,341 | ||
| about US$5,317.73 | ||
| about US$ 8,170.73 | ||
| None of above |
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Entrepreneurial Finance
Authors: M. J. Alhabeeb
1st Edition
1118691512, 978-1118691519
