Assume the following information:

Quoted Price

Spot rate of Australian dollar USD.855/AUD

180-day forward rate of Australian dollar USD.839/AUD

180-day Australian interest rate (a periodic rate) 3.0%

180-day U.S. interest rate (a periodic rate) 4.4%

A. What % ROR can a US investor earn if they attempt covered interest arbitrage?

B. What % ROR can an Australian investor earn if they attempt covered interest arbitrage?

C. Given this information, who has a covered interest arbitrage opportunity? Answer either Australian investors or U.S. investors.

D. What changes in the 4 quoted prices above would likely occur to eliminate any further possibilities of covered interest arbitrage? ( answer with just or )

Spot rate of Australian dollar

180-day forward rate of Australian dollar

180-day Australian interest rate (a periodic rate)

180-day U.S. interest rate (a periodic rate)