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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 is $.110. • The 60-day forward rate of the Moroccan dirham is $.108. • The 60-day interest rate in the U.S. 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. Would covered interest arbitrage be possible for a Moroccan investor in this case?

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Financial Management, Finance

Category:- Financial Management
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