There is $500,000 to invest. U.S is offering a 60-day interest rate of 6 percent per annum, while Malaysia is giving 12 percent per annum for a tenure of 60 days. The spot rate of Ringgit Malaysia (RM) is $0.110 and the forward rate is $0.108. Ignoring all the tax effects.

Would an American investor or Malaysian investor benefit from this arbitrage?

Answer rating: 100% (QA)

1 As Per Interest rate parity theory forward rate Spot rate 1Interest rate in US1... View the full answer