question archive Assume the following information: · An Italian investor has €125,000 to invest
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Assume the following information:
· An Italian investor has €125,000 to invest.
· The current spot rate of Pakistani Rupee is €0.0051
· The 60-day forward rate of the Pakistani Rupee is €0.0050.
· The 60-day interest rate in Italy is 1.74 percent.
· The 60-day interest rate in Pakistan is 3.8 percent.
What is the yield to an Italian investor who conducts covered interest arbitrage? Did covered interest arbitrage work for the investor in this case?
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