Assume the following information:
U.S. investors have $1,000,000 to invest:
1year deposit rate offered on U.S.
dollars =12%
1year deposit rate offered on Singapore
dollars =10%
1year forward rate of Singapore
dollars =$.412
Spot rate of Singapore
dollar =$.400
Then:
interest rate parity exists and covered interest arbitrage 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 above what is possible domestically. 

interest rate parity exists and covered interest arbitrage 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 below what is possible domestically. 
The yield from the CIA problem above is:
12% 

.042% 

1.2% 

none of the above 
Your company will receive C$600,000 in 90 days. The 90day forward rate in the Canadian dollar is $.80. If you use a forward hedge, you will:
receive $750,000 today. 

receive $750,000 in 90 days. 

pay $750,000 in 90 days. 

receive $480,000 in 90 days. 

receive $480,000 today. 
Interest rate parity doesn't exist and covered interest arbitrage by U.S. investor’s results in a yield above what is possible domestically.
The yield from the CIA problem above is
None of the above
Amount required to invest by us 
$10,00,000 
spot rate of Singapore dollar 
$0.40 
2500000 

Deposit rate offered on Singapore dollars 
1.1 
2750000 

One year forward rate to Singapore dollars 
$0.41 
$11,33,000.00 

Yield [$1,133,000$1,000,000]/1000,000 
13.3% 
Your company will receive C$600,000 in 90 days. The 90day forward rate in the Canadian dollar is $.80. If you use a forward hedge, you will:
receive $480,000 in 90 days.
($600,000*$0.80)
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