U.S. investors have $900,000 million to invest 1-year deposit rate offered by U.S. banks = 3.5% 1-year deposit rate offered on Australian $ = 3% 1-year forward rate of Australian $ = $0.64 Spot rate of Australian $ = $0.62
If you conduct covered interest arbitrage, what is the dollar profit you will have realized after 180 days?
Answer
$31,500
$56,903
$61,548
$27,000