Question: Need an expert to explain the question. :) 3. Suppose that three month interest rates in Australia are 7.66% for borrowing and 5.66% for lending

Need an expert to explain the question. :)

3. Suppose that three month interest rates in Australia are 7.66% for borrowing and 5.66% for lending and in New Zealand they are 8.63% for borrowing and 6.63% for lending. If the current spot rate is 1.1578 / 1.1601 AUD / NZD and the current three month forward rate is 1.020 / 1.046 AUD / NZD. a) Would investors in either Australia or New Zealand be likely to invest overseas? b ) As an arbitrageur where would you borrow? c) Assuming no additional transaction costs, what percentage arbitrage profit could be generated (Calculate as a percentage of your initial borrowings)

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