Question: Suppose that the current spot exchange rate between the US dollar and NZ dollar is $.70/NZ$ and the 1-year forward rate is $.695. The one

Suppose that the current spot exchange rate between the US dollar and NZ dollar is $.70/NZ$ and the 1-year forward rate is $.695. The one year interest rates are 1% for the USD and 3% for the NZ$. What is the payoff if a US MNC conducts covered interest arbitrage, for a $1,000,000 starting amount?

1,022,643

$1,010,000

$985,857

$1,000,540

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