1. Suppose that the oneyear forward rate of the Australian dollar is F_US$/A$ = US$0.54/A$ and the current spot rate of the Australian dollar is S_US$/A$ = US$0.5/A$. The oneyear Australia interest rate is 6 percent. The oneyear U.S. interest rate is 10 percent.

Please calculate the percent yield from covered interest arbitrage by U.S. investors and explain if the covered interest arbitrage is feasible for U.S. investors. Also, is the arbitrage feasible for the Australian investors? Explain.