Covered Interest Arbitrage in Both Directions. The following information is available: • You have $500,000 to invest. • The current spot rate of the Moroccan dirham is $.110. • The 60-day forward rate...

Covered Interest Arbitrage in Both Directions. The
following information is available:
• You have $500,000 to invest.
• The current spot rate of the Moroccan dirham is
$.110.
• The 60-day forward rate of the Moroccan dirham is $.108.
• The 60-day interest rate in the United States is
1 percent.
• The 60-day interest rate in Morocco is 2 percent.
a. What is the yield to a U.S. investor who conducts
covered interest arbitrage? Did covered interest arbitrage work for the investor in this case?
b. Would covered interest arbitrage be possible for a
Moroccan investor in this case?