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Assume the following information: U.S. investors have $1,000,000 to invest 1-year deposit rate offered on U.S. dollars = 8.74% 1-year deposit rate offered on Singapore
Assume the following information: U.S. investors have $1,000,000 to invest 1-year deposit rate offered on U.S. dollars = 8.74% 1-year deposit rate offered on Singapore dollars= 12.00% 1-year forward rate of Singapore dollars = $0.400 Spot rate of Singapore dollar = $0.412 1. Is there any opportunity for covered interest arbitrage? A. Yes because Singapore $ is trading at a premium of 3% and not 1.82% as per the IRP B. No because Singapore $ is trading at a discount of 2.91% which is as per the IRP C. No because Singapore $ is trading at a discount of 1.82% which is as per the IRP D. Yes because Singapore $ is trading at a discount of 2.91% and not 1.79% as per the IRP 2. Is there any opportunity for covered interest arbitrage? A. Yes because Singapore $ is trading at a premium of 3% and not 1.82% as per the IRP B. No because Singapore $ is trading at a discount of 1.82% which is as per the IRP C. Yes because Singapore $ is trading at a discount of 2.91% and not 1.79% as per the IRP D. No because Singapore $ is trading at a discount of 2.91% which is as per the IRP
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