Is covered interest arbitrage worth while

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Reference no: EM131575700

You may borrow $25,000 worth of any currency that you are free to invest in any currency. You can trade, borrow, and lend at the following rates:

Spot rate, US dollars per South Korean won (W) 0.00125$/W

One year forward rate for $/W 0.00147$/W

One year Korean interest rate 7%

One year U.S. interest rate 19%

Is covered interest arbitrage worth while? If so, explain the steps and compute the profit based on your initial $25,000 worth of either currency.

Reference no: EM131575700

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