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Assume the following information: Quoted Price Spot rate of Australian dollar USD.855/AUD 180day forward rate of Australian dollar USD.839/AUD 180day Australian interest rate (a periodic

Assume the following information:

Quoted Price

Spot rate of Australian dollar USD.855/AUD

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

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

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

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

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

Given this information, who has a covered interest arbitrage opportunity?

Answer either Australian investors or U.S. investors.

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

180day forward rate of Australian dollar

180day Australian interest rate (a periodic rate)

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

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