Possibility of coverage interest rate arbitrage

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Given the following information, show whether covered interest arbitrage possible for U.S. investors. Also, what is the dollar profit and % yield for the U.S. investor with US$1million available, attempting to conduct covered interest arbitrage in Israel?

1-year interest rate in U.S. 5%
1-year interest rate in Israel 7%
1-year forward rate of Israeli shekel (ILS) USD 0.3003
Spot rate of Israelis shekel (ILS) USD 0.3052

Also based on the information in the problem directly above, what forward rate eliminates the possibility of coverage interest rate arbitrage?

Reference no: EM133001978

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