Question: Use this information to answer the question below: The spot rate (current exchange rate) is Z1.99/$ The annual risk-free borrowing/investing rate in Country Z is

Use this information to answer the question below: The "spot rate" (current exchange rate) is Z1.99/$ The annual risk-free borrowing/investing rate in Country Z is 6.04% The one-year forward rate is Z2.06/$ If there are no transaction costs, what must be the annual risk-free borrowing/lending rate in U.S. for no covered interest arbitrage opportunity to be available? Assume that you are an American investor (so your cash is currently in U.S. dollars). Write your answer out to four decimals - for example, write 3.05% as .0305.

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