1) You have $100,000 to invest
2) The current ask quote for Australian dollars (A$) in the spot market is $0.71
3) The current bid quote for Australian dollars (A$) in the spot market is $0.70
4) The one-year forward rate (ask) for A$ is $0.71
5) The one year forward rate (bid) for A$ is $0.70
6) The one-year U.S. interest rate is 7%
7) The one-year Australian interest rate is 9%.
If you conduct covered interest arbitrage, what U.S. dollar amount will you have after one year?
a. $107,464.80
b. $110,557.10
c. $153,521.10
d. $105,493.00
e. None of these choices are correct.