# Question

Assume that the annual interest rate on a six-month U.S. Treasury bill is 5%, and use the data presented in Figure to answer the following:

a. Calculate the annual interest rate on six-month bills in Canada and Japan.

b. Suppose that the annual interest rate on a six-month bill in Japan is 0.5%. Illustrate how to exploit this via covered interest arbitrage.

c. Suppose that the annual interest rate on a three-month U.K. government bond is 4%. What is the annual interest rate on a three-month government bond in Switzer-land?

d. Suppose that the actual Swiss interest rate is 0.5%. Illustrate how to conduct covered interest arbitrage to exploit this situation.

a. Calculate the annual interest rate on six-month bills in Canada and Japan.

b. Suppose that the annual interest rate on a six-month bill in Japan is 0.5%. Illustrate how to exploit this via covered interest arbitrage.

c. Suppose that the annual interest rate on a three-month U.K. government bond is 4%. What is the annual interest rate on a three-month government bond in Switzer-land?

d. Suppose that the actual Swiss interest rate is 0.5%. Illustrate how to conduct covered interest arbitrage to exploit this situation.

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