Problem:
Covered Interest Arbitage in Both Directions
The one-year interest rate in New Zealand is 6%.
The one-year interest rate in US is 10%
The soot rate of the New Zealand dollar (NZs) is $.50
The forward rate of the New Zealand dollar is $.54
Is covered interest arbitrage feasible for US investors?
Is it feasible for NZ investors?
In each case, please explain why covered intrest arbitrage is or is not feasible?