Sayang Selasih Berhad is given the following quotes: Spot rate USD0.7250/NZD Six-month forward rate USD0.7350/NZD Intere

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answerhappygod
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Sayang Selasih Berhad is given the following quotes: Spot rate USD0.7250/NZD Six-month forward rate USD0.7350/NZD Intere

Post by answerhappygod »

Sayang Selasih Berhad is given the following quotes:
Spot rate USD0.7250/NZD
Six-month forward rate USD0.7350/NZD
Interest rate United States 7 percent per annum
Interest rate New Zealand 6 percent per annum
Assume that Sayang Selasih Berhad can borrow as much as USD1
million or NZD5 million for its coming project. If Interest
Rate Parity (IRP) is not holding, determine how would
Sayang Selasih Berhad carry out covered interest arbitrage
(CIA) opportunity and compute the profit.
*Choose either USD or NZD to do this
question
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