The return from covered interest arbitrage by us investors, Financial Management

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The return from covered interest arbitrage by us investors

Assume the following information

Current spot rate of Australian dollar = $0.66

Forecasted spot rate of Australian dollar 1 year from now = $0.59

1-year forward rate of Australian dollar = $0.62

Annual interest rate for Australian dollar deposit = 9%

Annual interest rate in the U.S. = 6%

Given the information in this question, the return from covered interest arbitrage by U.S. investors with $510,000 to invest is about _______.

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