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Q1) Given the following information You have 100,000 to invest for 1 year 1-year interest rate on south African rand is 6% 1-year interest rate
Q1) Given the following information You have 100,000 to invest for 1 year 1-year interest rate on south African rand is 6% 1-year interest rate on is 5% Current spot rate is 0.10/Rand 1-year forward rate is 0.09905/Rand is the home currency A. What is your return if you invest 100,000 at the interest rate on ? B. What is your return if you invest 100,000 at the interest rate on Rand by applying covered interest arbitrage? C. What is your excess return? Why?
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