Assume the following information: Spot Rate of 1=$1.70 1-year forward rate of is 1=$1.65...
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Finance
Assume the following information:
Spot Rate of 1=$1.70
1-year forward rate of is 1=$1.65
1-year British interest rate = 5%
1-year U.S. interest rate = 4%
You are in the U.S. and want to invest $ 100 using covered interest arbitrage strategy for 1 year.
(a) Based on the above information, what will be the amount of U.S. dollars you will have after 1 year? Please show your calculation to get full credits.
(b) Where do you want to invest based on your calculation in part (a)? Please explain to get full credits
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