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Casper Landsten-CIA (A). Casper Landsten is a foreign exchange trader for a bank in New York. He has $0.95 million (or its Swiss franc equivalent)

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Casper Landsten-CIA (A). Casper Landsten is a foreign exchange trader for a bank in New York. He has $0.95 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 Spot exchange rate (SFr/S) 3-month forward rate (SFr/5) U.S. Dollar annual interest rate Swiss franc annual interest rate 950,000 1.2811 1.2742 4.797 % 3.196 % The CIA profit potential is %, which tells Casper Landsten he should borrow and invest in the yielding currency, the in order to earn covered interest arbitrage (CIA) profits. (Round to three decimal places and select from the drop-down menus.)

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