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One-year interest rates are currently at 9% for New Zealand and 4% for Australia

Finance

One-year interest rates are currently at 9% for New Zealand and 4% for Australia. The spot rate is A$0.88/NZ$, while the 1-year forward rate is A$0.88/NZ$. Which of the following correctly describes a profitable arbitrage opportunity?

  A.

An Australian investor invests in New Zealand securities while agreeing to sell AU$ forward.
  B.

An Australian investor invests in New Zealand securities while agreeing to sell NZ$ forward.
  C.

A New Zealand investor invests in Australian securities while agreeing to sell NZ$ forward.
  D.

There is not enough information to answer the question.
  E.

None of the options.

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