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The spot price for foreign currency in Australia is $0.6873/A$. The three month forward rate is $0.7117/A$. The three month interest rate for risk-free bonds
The spot price for foreign currency in Australia is $0.6873/A$. The three month forward rate is $0.7117/A$. The three month interest rate for risk-free bonds is 8.5% p.a. in Australia and 5.5% p.a. in the U.S. Using the above rates, can you engage in a covered interest rate arbitrage as an American investor? Use either $100,000 or A$100,000 as the notational amount.
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