covered interest rate differential

CFA Level II
#1

slightly lost here what is this?

#2

Given the following information: The forward rate between dollars and pounds is 1.66$/GBP. The current spot rate is 1.543 $/GBP. The UK interest rate is 5.77%. The interest rate in the United States is 5.976%. Assume a U.S. investor can borrow pounds or dollars. What is the covered interest rate differential? A) 0.6786. B) 0.07661. C) −0.07814. -------------------------------------------------------------------------------- Click for Answer and Explanation (1 + rD) − [(1 + rF)(forward rate)] / spot rate (1 + 0.05976) − [(1 + 0.0577)(1.66)] / 1.543 1.05976 − [(1.0577)(1.66)] / 1.543 1.05976 − (1.75578 / 1.543) 1.05976 − 1.13790 = −0.07814

#3

dont get it

#4

It says that: (F - S0)/S0 is approx = rfc - rdc

#5

i get the profit as 78141.5 dollars ?? wats d correct answer ??