1. Interest Rate Parity If the

1. Interest Rate Parity If the relationship that is specified by interest rate parity does not exist at any period but does exist on average, then covered interest arbitrage should not be considered by U.S. firms. Do you agree or disagree with this statement? Explain.

2. Covered Interest Arbitrage in Both Directions The 1-year interest rate in New Zealand is 6 percent. The 1-year U.S. interest rate is 10 percent. The spot rate of the New Zealand dollar (NZ$) is $.50. The forward rate of the New Zealand dollar is $.54. Is covered interest arbitrage feasible for U.S. investors? Is it feasible for New Zealand investors? In each case, explain why covered interest arbitrage is or is not feasible.

ORDER THIS OR A SIMILAR PAPER AND GET 20% DICOUNT. USE CODE: GET2O