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The South African rand has a one-year forward premium
The South African rand has a one-year forward premium 1. Covered Interest Arbitrage in Both Directions . Assume that the annual U.S. interest rate is currently 8 percent and Germany- annual interest rate is currently 9 percent. The euro- one-year forward rate currently exhibits a discount of 2 percent. a. Does interest rate parity exist? b. Can a U.S. firm benefit from investing funds in Germany using covered interest arbitrage? c. Can a German subsidiary of a U.S. firm benefit by investing funds in the United States through covered interest arbitrage? 2. Covered Interest Arbitrage. The South African rand has a one-year forward premium of 2 percent. One-year interest rates in the U.S. are 3 percentage points higher than in South Africa. Based on this information, is covered interest arbitrage possible for a U.S. investor if interest rate parity holds? Business Management Assignment Help, Business Management Homework help, Business Management Study Help, Business Management Course Help
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16 Apr 2016
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The South African rand has a one-year forward premium
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