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AUD USD 2. You want to invest $5,000,000 for 180 days. Assume you can invest in Australian dollars at 6% per annum and in U.S.

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AUD USD 2. You want to invest $5,000,000 for 180 days. Assume you can invest in Australian dollars at 6% per annum and in U.S. dollars at 1% per annum. The current spot rate is 1.28 and the 180-day forward rate is 1.2907. (a). Would you invest in Australia or in the U.S.? Why? Describe your strategy and quantify the arbitrage profit (in terms of USD), if any. (b). Does covered interest parity hold? Why? AUD USD

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