The following information is available: You have $500,000 to invest The current spot exchange rate for the

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The following information is available:

You have $500,000 to invest

The current spot exchange rate for the Moroccan dirham is $0.110.

The 60-day forward exchange rate for the Moroccan dirham is $0.108.

The 60-day interest rate in the US is 1 percent.

a) The 60-day interest rate in Morocco is 2 percent. What is the return for a US investor conducting a covered interest arbitrage? Did the covered interest arbitration work for the investor in this case?

b. Would arbitration of interests covered for a Moroccan investor be possible in this case?

Related Book For answer-question

Contemporary Financial Management

ISBN: 9780324289114

10th Edition

Authors: James R Mcguigan, R Charles Moyer, William J Kretlow

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Posted Date: May 04, 2023 07:55 AM

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The following information is available: You have $500,000 to invest The current spot exchange rate for the

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a To conduct a covered interest arbitrage the investor needs to borrow in the currency with the lowe... View the full answer

Contemporary Financial Management

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