Covered interest rate arbitrage

Assignment Help Financial Management

Reference no: EM131920085

Assume the following information:

You have $ 300,000 to invest.

Current spot rate of Chilean peso (CLP) = $0.00350

90-day forward rate of Chilean peso = $0.00356

90-day interest rate in U.S. is = 3.7%

90-day interest rate in Chile = 4.0%

If covered interest rate arbitrage is used for a 90-day investment, what would be the yield (percentage return) to a U.S. investor?

Reference no: EM131920085

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