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6.12 Casper Landsten-CIA (A). Casper Land- sten is a foreign exchange trader for a bank in New York. He has $1 million (or its Swiss
6.12 Casper Landsten-CIA (A). Casper Land- sten is a foreign exchange trader for a bank in New York. He has $1 million (or its Swiss franc equivalent) for a short-term money market in- vestment and wonders whether he should in- vest in U.S. dollars for three months or make a CIA investment in the Swiss franc. He faces the following quotes: > $1,000,000 Arbitrage funds avail able 1.2810 Spot exchange rate (SFr/$) 1.2740 3-month forward rat e (SFr/$) U.S. dollar 3-month i 4.800% nterest rate Swiss franc 3-month 3.200% interest rate
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