Assume the following information:

One-year interest rate in New Zealand	5 percent
One-year interest rate in U.S	12 percent
Spot rate NZ$	$0.60
Forward rate NZ$	$0.54
initial investment of $10,000,000 (US (NZ) dollars for US (NZ) investor

Is covered interest rate possible for US investors? New Zealand investors? Explain why covered interest rate arbitrage is or is not feasible.

Assume the following:

You can buy a euro for 14 pesos.

The bank will pay you 13 pesos for a euro.

You can buy a U.S. dollar for .9 euros.

The bank will pay you .8 Euros for a U.S. dollar.

You can buy a U.S. dollar for 10 pesos.

The bank will pay you 9 pesos for a U.S. dollar.

You have $1,000.

Can you use triangular arbitrage to generate a profit? If so, explain the order of the transactions that you would execute, and the profit that you would earn. If you cannot earn a profit from triangular arbitrage, explain why.