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Further possibilities of covered interest arbitrage

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Reference no: EM131554787

Assume the following information:

Quoted Price Spot rate of Singapore dollar $.75

90 day forward rate of Singapore dollar $.74

90 day Singapore interest rate 4.5%

90 day U.S. interest rate 2.5%

Given this information, what would be the yield (percentage return) to a U.S. investor who used covered interest arbitrage? (Assume the investor invests $1,000,000.) What market forces would occur to eliminate any further possibilities of covered interest arbitrage?

Reference no: EM131554787

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