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The one year interest rate in Australia is 7% percent. The one year U.S. interest rate is 11 percent. The spot rate of the Australia
The one year interest rate in Australia is 7% percent. The one year U.S. interest rate is 11 percent. The spot rate of the Australia dollar (AUD\$) is \$.65. The forward rate of the New Zealand dollar is \$.69. What is the yield to a US investor who uses covered interest arbitrage? Is it feasible for New Zealand investors? In each case, explain why covered interest arbitrage is or is not feasible. a. 0.8% b. 17.83% c. 11% d. 13.59%
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