Assume the following information: Current spot rate of New Zealand dollar = $.41 Forecasted spot rate of New Zealand dollar 1 year from now = $.45 One-year forward rate of the New Zealand dollar = $.42 Annual interest rate on New Zealand dollars = 8% Annual interest rate on U. S. dollars = 9% Given the information in this question, the return from uncovered interest arbitrage by U. S. investors with $400,000 to invest is A) about 11.97 B) about 10.63 C) about 11.12 D) about 13.27 E) about 18.54

B) about 10.63

Explanation:

Calculation to determine what return from uncovered interest arbitrage by U.S. investors with $400,000 to invest is

First step is to calculate the Current Amount of New Zealand dollar

New Zealand dollar=$400,000/$.41

New Zealand dollar=$975,609.76

Second step is to calculate the Increase based on the Annual interest rate on New Zealand dollars

Increase in New Zealand dollars = $975,609.76×(1+.08)

Increase in New Zealand dollars = $975,609.76× (1.08)

Increase in New Zealand dollars=$1,053,658.54

Third step is to calculate the forward rate amount of the New Zealand dollar

Forward rate amount of New Zealand dollar = $1,053,658.54× .42

Forward rate amount of New Zealand dollar= $442,536.63

Now let calculate return from uncovered interest arbitrage

Return = ($442,536.63 –$400,000)/$400,000

Return = $42,536.63/$400,000

Return=0.1063*100

Return= 10.63%

Therefore return from uncovered interest arbitrage by U.S. investors with $400,000 to invest is about 10.63 %

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know