Profit from covered interest arbitrage today the one-year, Financial Management

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Profit from covered interest arbitrage today the one-year

Profit from Covered Interest Arbitrage. Today, the one-year U.S. interest rate is 4%, while the one-year interest rate in Argentina is 17%. The spot rate of the Argentine peso (AP) is $.44. The one-year forward rate of the AP exhibits a 14% discount. Determine the yield (percentage retrun on investment) to an investor from Argentina who engages in covered interest arbitrage.

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