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4. Assume the following information: Spot rate of Swiss Franc: $0.95 90-day forward rate of Swiss Franc: $0.93 90-day Switzerland interest rate: 5% 90-day U.S.

4. Assume the following information:

Spot rate of Swiss Franc: $0.95

90-day forward rate of Swiss Franc: $0.93

90-day Switzerland interest rate: 5%

90-day U.S. interest rate: 2%

Given this information, what would be the yield (percentage return) to a U.S. investor who used covered interest arbitrage? (Assume the investor invests $1 million.) What market forces would occur to eliminate any further possibilities of covered interest arbitrage?

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