Explain why covered interest rate arbitrage is or is not, Financial Management

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Explain why covered interest rate arbitrage is or is not

Assume the following information: • One-year interest rate in New Zealand 5 percent • One-year interest rate in U.S 12 percent • Spot rate NZ$ $0.60 • Forward rate NZ$ $0.54 • initial investment of $10,000,000 (US (NZ) dollars for US (NZ) investor Is covered interest rate possible for US investors? New Zealand investors? Explain why covered interest rate arbitrage is or is not feasible.

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Financial Management: Explain why covered interest rate arbitrage is or is not

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