What is the arbitrage yield

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Assume the following information: Current spot rate of Australian Dollar= $.9010 Forecasted spot rate of Australian Dollar in 6month=0.8900 Six months forward rate of the Australian Dollar=$.8850 Annual interest rate on Australian Dollars=3.5% Annual interest rate on U.S. dollars=2.87% Given this information, do arbitrage opportunities exist for American or Australian investors? What is the arbitrage yield? Assume $250,000 of initial arbitrage capital (or its equivalent in Australian Dollars)

Reference no: EM132039079

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