Question
Assume the following information: Spot rate today of Swiss franc = $.60 1-year forward rate as of today for Swiss franc = $.63 Expected spot
Assume the following information:
| Spot rate today of Swiss franc | = | $.60 |
| 1-year forward rate as of today for Swiss franc | = | $.63 |
| Expected spot rate 1 year from now | = | $.64 |
| Rate on 1 year deposits denominated in Swiss francs | = | 7% |
| Rate on 1 year deposits denominated in U.S. dollars | = | 9% |
From the perspective of Swiss investors with SF1,000,000, covered interest arbitrage would yield a rate of return of ______%.
Show how you calculate your answer.
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Fundamentals Of Investments
Authors: Charles J. Corrado
3rd Edition
0072829192, 978-0072829198
