Covered interest arbitrage for one year investment

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Reference no: EM131511946

You have $5,000 (US dollars) to invest:

Current spot rate of euro = $1.10

1-year forward rate of euro = $1.08

1-year deposit rate in U.S. = 2%

1-year deposit rate in Europe = 4%

If you use covered interest arbitrage for a 1-year investment, what will be the amount of U.S. dollars you will have after one year?

$5,296.30.

$5,105.45.

$5,007.27.

$5,194.44

Reference no: EM131511946

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