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Covered Interest Arbitrage in Both Directions: The information given below 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. Determine the yield to U.S. investor who performs covered interest arbitrage? Did covered interest arbitrage work for investor in this case?

b. Would covered interest arbitrage be possible for the Moroccan investor in this case?

Business Management, Management Studies

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