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Covered Interest Arbitrage in Both Directions

Covered Interest for New Zealand (NZs) and US dollars.

The one-year interest rate in New Zealand is 6%.
The one-year interest rate in US is 10%
The spot rate of the New Zealand dollar (NZs) is $.50
The forward rate of the New Zealand dollar is $.54

Is covered interest arbitrage feasible for US investors?
In each case, please explain why covered interest arbitrage is or is not feasible?

Is it feasible for NZ investors?

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Covered Interest Arbitrage in Both Directions

The one-year interest rate in New Zealand is 6%.
The one-year interest rate in US is 10%
The spot rate of the New Zealand dollar (NZs) is $.50
The forward rate of the New Zealand dollar is $.54

Is covered interest arbitrage feasible for US investors?
In each case, please explain why covered interest arbitrage is or is not feasible?
1) assume borrow money in US for $1,000 for 1 ...

Solution Summary

This solution is comprised of a detailed explanation to answer is covered interest arbitrage feasible for US/NZ investors.

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