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Subject: International Financial Management (b) In New Zealand, the one-year interest rate is 6%. The one-year interest rate in the United States is 10%. The

Subject: International Financial Managementimage text in transcribed

(b) In New Zealand, the one-year interest rate is 6%. The one-year interest rate in the United States is 10%. The New Zealand dollar (NZ$) has a spot rate of $.50. The New Zealand dollar has a forward rate of $.54. (1) Explain if covered interest arbitrage can benefit US or New Zealand investors. (ii) Explain why covered interest arbitrage is or is not conceivable in each situation. (7 marks)

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