Question
Casper Landsten is a foreign exchange trader who has access to $1 million (or its Swiss Franc equivalent). Assume the spot exchange rate (SFr/$) is
Casper Landsten is a foreign exchange trader who has access to $1 million (or its Swiss Franc equivalent). Assume the spot exchange rate (SFr/$) is SFr1.278/$ and the 2-month forward rate is SFr1.275/$. Also assume that the US dollar 2-month interest rate (annualized) is 3.6% and that the Swiss franc 2-month interest rate (annualized ) is 2.4%.
In order to make a riskless profit, Casper should:
Group of answer choices
borrow dollars and invest in francs
it's impossible to make a profit here
borrow dollars and invest in dollars
borrow francs and invest in dollars
borrow francs and invest in francs
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