The Cambodian interest rate is 6% and the Vietnam interest rate is 7%. The spot exchange rate of one Cambodian riel is 5.6 Vietnamese dong (VND) and the one-year forward rate of riel is VND5.7. About potential covered interest arbitrage (CIA) between Cambodia and Vietnam, _____. a. there will be no CIA b. money will flow to Cambodia c. money can go both ways d. money will flow to Vietnam
The Cambodian interest rate is 6% and the Vietnam interest rate is 7%. The spot exchange rate of one Cambodian riel is 5.6 Vietnamese dong (VND) and the one-year forward rate of riel is VND5.7. About potential covered interest arbitrage (CIA) between Cambodia and Vietnam, _____. a. there will be no CIA b. money will flow to Cambodia c. money can go both ways d. money will flow to Vietnam
Chapter11: Managing Transaction Exposure
Section: Chapter Questions
Problem 1ST
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The Cambodian interest rate is 6% and the Vietnam interest rate is 7%. The spot exchange rate of one Cambodian riel is 5.6 Vietnamese dong (VND) and the one-year forward rate of riel is VND5.7.
About potential covered interest arbitrage (CIA) between Cambodia and Vietnam, _____.
a.
there will be no CIA
b.
money will flow to Cambodia
c.
money can go both ways
d.
money will flow to Vietnam
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