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Casper Landsten is a foreign exchange trader for a bank in New York. He has $1.05 million (or its Swiss franc equivalent) for a short
Casper Landsten is a foreign exchange trader for a bank in New York. He has $1.05 million (or its Swiss franc equivalent) for a short term money market investment and wonders if he should invest in U.S dollars for three months, or make a CIA investment in the Swiss franc. He faces the following quotes:
| Arbitrage funds available | $1,050,000 |
| Spot exchange rate (SFr/$) | 1.2811 |
| 3-month forward rate (SFr/$) | 1.2743 |
| U.S Dollar annual interest rate | 4.803% |
| Swiss franc annual interest rate | 3.201% |
What is the CIA profit potential in %?
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