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question 1 Currently, the spot rate is AUD1.4300/USD and the one year forward rate is AUDI 4600/USD. Interest rate in United States is 5% per

question 1

Currently, the spot rate is AUD1.4300/USD and the one year forward rate is AUDI 4600/USD. Interest rate in United States is 5% per annum and in Australia is 4% per annum, Assume that you can borrow as much as USD349,650.3497 or AUD500,000 for your coming project. If Interest Rate Parity (IRP) is not holding. determine how would you carry out covered interest arbitrage (CIA) and compute the profit.

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