Fractional return from covered interest arbitrage

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Reference no: EM131853615

Assume the following information

Current spot rate of New Zealand dollar = $0.41

Forecasted spot rate of New Zealand dollar 1 year from now = $0.43

One-year forward rate of the New Zealand dollar = $0.42

Annual interest rate on New Zealand dollars = 0.075

Annual interest rate on U.S. dollars = .09

Given the information in this question, the fractional return from covered interest arbitrage by U.S. investors is about ________.

Reference no: EM131853615

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