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Percentage return from covered interest arbitrage

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Reference no: EM132055015

Assume the following information:

Current spot rate of Australian dollar =$.86

Forecasted spot rate of Australian dollar 1 year from now =$.88 1-year forward rate of Australian dollar =$.93

Annual interest rate for Australian dollar deposit =4%

Annual interest rate in the U.S. =2%

What is your percentage return from covered interest arbitrage with $650,000?

Reference no: EM132055015

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