$3.$CIA Susan Prescott is a foreign exchange trader for a bank in New York. She has $$1$ million $($or its Swiss

franc equivalent$)$ for a short term money market investment and wonders if she should invest in U$.$S$.$ dollars

for three months, or make a covered interest arbitrage $($CIA$)$ investment in the Swiss franc. She faces the

following quotes:

What should Susan do$?$

$4.$UIA $.$Susan Prescott, using the same values and assumptions as in the previous question, now decides to

seek the full $2\mathrm{.}600\%$ return available in US dollars by not covering her forward dollar receipts $--$ an

uncovered interest arbitrage $($UIA$)$ transaction. Assess this decision