Covered Interest Arbitrage in Both Directions. The following information is available:• You have 500,000 to invest.• The current spot rate of the Moroccan dirham is0.110.• The 60-day forward rate of the Moroccan dirham is 0.108.• The 60-day interest rate in the United States is 1 percent.• The 60-day interest rate in Morocco is 2 percent.a. What is the yield to a U.S. investor who conducts covered interest arbitrage? Did covered interest arbitrage work for the investor in this case?b.

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SOLVED: The current spot rate is C1.377 and the one-year forward rate is C1.316. The nominal risk-free rate in Canada is 4 percent while it is 8 percent in the U.S. Using covered interest arbitrage you can earn an extra profit over that which you would earn if you invested 1 in the U.S.

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