Assume the following information:
U.S. investors have $1,000,000 to invest
1-year deposit rate offered by U.S. banks = 12%
1-year deposit rate offered on Swiss francs = 10%
1-year forward rate of Swiss francs = $.62
Spot rate of Swiss franc = $.60
Given this information:
Group of answer choices
interest rate parity exists and covered interest arbit¬rage by U.S. investors results in a yield above what is possible domestically.
interest rate parity doesn’t exist and covered interest arbitrage by U.S. investors results in a yield above what is possible domestically.
interest rate parity exists and covered interest arbit¬rage by U.S. investors results in the same yield as investing domestically.
interest rate parity doesn’t exist and covered interest arbitrage by U.S. investors results in a yield below what is possible domestically.