There can be an opportunity for covered interest arbitrage if:
a. the interest rate is low and the exchange rate is high.
b. the forward/spot rate difference is either larger or smaller in percentage terms than the difference in the interest rates on two currencies.
c. there is a time lag on the settlement of the transactions.
d. the interest rate is high and the exchange rate is low.
Ans: b. the forward/spot rate difference is either larger or smaller in percentage terms than the difference in the interest rates on two currencies.
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