Investor using covered interest arbitrage

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Reference no: EM132007405

An investor in Country-A and one in Country-B invest in 1-year treasuries of the other country.

a. With Interest rate parity, the Country-A investor using covered interest arbitrage will earn the same return as other Country-A investors who invested in the domestic treasury. Comment.

b. With Interest rate parity, the Country-B investor using covered interest arbitrage will earn the same return as other Country-B investors who invested in the domestic treasury. Comment.

Reference no: EM132007405

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