Assume a US money manager has $100 million that needs to be invested short term. They see the following information Sport rate for £ is $1.5640/£, or £.6393/$ Forward rate for £ is $1.5328/£, or £.6524/$ The short-term interest rate in Britain is 12%, and the US short term rate is 9%.

Is covered interest arbitrage possible?

What is the strategy?

Answer rating: 100% (QA)

Yes covered interest arbitrage is possible in this case The strategy is as follows The US money mana... View the full answer