Solved: Investing funds in singapore by covered interest arbitrage, Finance Basics

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Investing funds in singapore by covered interest arbitrage

Problem:

Testing IRP:

The one-year interest rate in Singapore is 11 percent. The one-year interest rate in the U.S. is 6 percent. The spot rate of the Singapore dollar (S$) is $.50 and the forward rate of the S$ is $.46. Assume zero transactions costs.

a. Does interest rate parity exist?

b. Can a U.S. firm benefit from investing funds in Singapore using covered interest arbitrage?

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Finance Basics: Investing funds in singapore by covered interest arbitrage

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