Mr Nitin is a foreign exchange trader in a bank in New York. He has $1000 ( or its rupee equivalent) for a short term money market investment and wonders if he should invest in US Dollars for three months , or make covered interest arbitage investment in indian rupees. asses this decision. following are the quates

Arrbitrage funds available $1000

Spot exchange rate rs/$ is 64

3 month forward rate rs/$ is 65

US dollar 3-month interest rate 4.50%