The realignment process the will yield interest rate parity

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Reference no: EM131990874

Consider the following information available in the Citadel Bank: Spot Rate for the Canadian Dollar $0.80 180 – day forward rate of the Canadian Dollar $0.79 180 – day Canadian interest rate 4% 180 – day U.S. interest rate 2.5% (a)Given this information, would it be a prudent strategy to engage in covered interest arbitrage? Explain (b)If covered interest arbitrage is profitable how much profit would an investor earn if he/she uses $1,000,000? (c) Briefly discuss the realignment process the will yield interest rate parity.

Reference no: EM131990874

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