Question
Assume the following information: Spot rate of = $1.60 180-day forward rate of = $1.56 180-day British interest rate = 4% 180-day U.S. interest rate=
Assume the following information:
Spot rate of = $1.60
180-day forward rate of = $1.56
180-day British interest rate = 4%
180-day U.S. interest rate= 3%
(a)Based on this information, is covered interest arbitrage by U.S. investors feasible (assuming that U.S. investors use their own funds)? Explain.
(b)Does interest rate parity exist? Explain.
(Please provide detailed answers)
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Fundamentals of Investing
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
12th edition
978-0133075403, 133075354, 9780133423938, 133075400, 013342393X, 978-0133075359
