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Jennifer is considering a covered interest arbitrage investment in UK pounds. The current exchange rate is 0.50/$ and the six - month forward rate is

Jennifer is considering a covered interest arbitrage investment in UK pounds.

The current

exchange rate is 0.50/$ and the six

month forward rate is 0.49/$.

If the annual rate on

riskless securities in the US is 3% then Jennifer will make a greater profit via CIA compared

to the US investment.

Topic:

Covered Interest Arbitrage

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