The one-year interest rate in New Zealand is 12 percent...
The one-year interest rate in New Zealand is 12 percent. The one-year U.S. interest rate is 17 percent. The spot rate of the New Zealand dollar (NZ$) is $0.4325. The forward rate of the New Zealand dollar is $0.4412.
a. Is covered interest arbitrage feasible for U.S. investors?
b. Is it feasible for New Zealand investors?
Show all the necessary calculations. Assume that the U.S. investor can borrow $500,000 and the New Zealand investor can borrow NZ$900,000
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