Question
Suppose 1-year interest rates are 11% in South Africa and 4% in the United States. The current spot rate of the South African Rand (ZAR)
Suppose 1-year interest rates are 11% in South Africa and 4% in the United States. The current spot rate of the South African Rand (ZAR) is USD 0.12.Forward contracts on ZAR are available with a 7% discount.
Question: Can a US-based investor successfully use Covered Interest Arbitrage in South Africa? Explain.
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Microeconomics
Authors: Glenn Hubbard, Anthony O'Brien
7th Edition
0134737504, 978-0134737508
