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FinanceInternational Financial ManagementCovered Interest Arbitrage in Both Directions The following information is available: You have $500,000 to invest. The current spot rate of the Moroccan dirham is s0.110. The 60 -day forward rate of the Moroccan dirham is s0.108. The 60 -day interest rate in the United States is 1 percent. The 60 -day interest rate in Morocco is 2 percent. What is the yield to a U.S. investor who conducts covered interest arbitrage? Did covered interest arbitrage work for the investor in this case? Would covered interest arbitrage be possible for a Moroccan investor in this case?FindFind*launch*

14th Edition

Madura

Publisher: Cengage

ISBN: 9780357130698

Chapter 7, Problem 22QA

Textbook Problem

Covered Interest Arbitrage in Both Directions The following information is available:

You have $500,000 to invest.

The current spot rate of the Moroccan dirham is s0.110.

The 60 -day forward rate of the Moroccan dirham is s0.108.

The 60 -day interest rate in the United States is 1 percent.

The 60 -day interest rate in Morocco is 2 percent.

- What is the yield to a U.S. investor who conducts covered interest arbitrage? Did covered interest arbitrage work for the investor in this case?
- Would covered interest arbitrage be possible for a Moroccan investor in this case?

This textbook solution is under construction.