Assume the Following Information: Current Spot Rate of New Zealand

question 42

Multiple Choice

Assume the following information: Current spot rate of New Zealand dollar
=
$) 41
Forecasted spot rate of New Zealand dollar 1 year from now
=
$) 43
One-year forward rate of the New Zealand dollar
=
$) 42
Annual interest rate on New Zealand dollars
=
8%
Annual interest rate on U.S. dollars
=
9%
​
Given the information in this question, the return from covered interest arbitrage by U.S. investors with $500,000 to invest is ____ percent.

• A) about 11.97
• B) about 9.63
• C) about 11.12
• D) about 11.64
• E) about 10.63

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Definitions:

Hypersecretion

The excessive production and release of a substance from a gland.

Growth Hormone

A hormone secreted by the anterior pituitary gland that stimulates growth, cell reproduction, and cell regeneration.

Gigantism

A condition characterized by excessive growth and height significantly above average, due to an overproduction of growth hormone in childhood.

Antidiuretic Hormone

A hormone released by the pituitary gland that regulates water balance by reducing urine production and increasing water reabsorption by the kidneys.