The return from covered interest arbitrage

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Reference no: EM132032077

Let's assume the following information:

Current spot rate of Canadian dollar = $0.75

Forecasted spot rate of Canadian dollar 1 year from now = $.83

One-year forward rate of the Canadian dollar = $0.73

Annual interest rate on Canadian dollars = .07

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

Given the information in this question, the return from covered interest arbitrage by U.S. investors with $430,000 to invest is about _______.

Reference no: EM132032077

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