Covered interest arbitrage. Assume the following information:

Current spot rate $of$ New Zealand dollar $=$$$0\mathrm{.}41$

Forward rate $of$ New Zealand dollar for $360-$day $(1$ year$)$ delivery $=$$$0\mathrm{.}43$

Annual interest rate $on$ New Zealand dollars $=8\%$

Annual interest rate $onU.S.$ dollars $=9\%$

a$)$ Given the information in this question, what is the return, in terms of dollars, on the domestic $($$$)$ deposit?

b$)$ What is the return, in terms of dollars, on the covered foreign $($NZ$$)$ deposit?

c$)$ Given your answers in $($a$)$ and $($b$)$ above, does the covered interest rate parity condition hold true? Yes, no$,$ and why? If not, how would you borrow and lend in order to take advantage of the arbitrage situation and what would the arbitrage profit $(\%)$ be$?$

d$)$ In the case that the covered interest arbitrage condition does not hold, describe the dynamic adjustment in the foreign exchange and money markets.