Question
Covered Interest Arbitrage in Both Directions The one-year interest rate in New Zealand is 6 percent. The one-year U.S. interest rate is 10 percent. The
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Covered Interest Arbitrage in Both Directions The one-year interest rate in New Zealand is 6 percent. The one-year U.S. interest rate is 10 percent. The spot rate of the New Zealand dollar (NZ$) is $.50 . The forward rate of the New Zealand dollar is $.54 . Is covered interest arbitrage feasible for U.S. investors? Is it feasible for New Zealand investors? In each case, explain why covered interest arbitrage is or is not feasible.
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Finance For Executives Managing For Value Creation
Authors: Gabriel Hawawini, Claude Viallet
3rd Edition
0324274319, 9780324274318
