Can a us firm benefit from investing funds in singapore

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Reference no: EM13936214

Testing IRP. The one-year interest rate in Singapore is 11%. The one-year interest rate in the United States is 6%. The spot rate of the Singapore dollar (S$) is $0.50 and the forward rate of the S$ is $0.46. Assume zero transactions costs.

a. Does interest rate parity exist?

b. Can a US firm benefit from investing funds in Singapore using covered interest arbitrage?

Reference no: EM13936214

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