Question
Casper Landsten-UIA (B). Casper Landsten is a foreign exchange trader for a bank in New York. Using the values and assumptions below, he decides to
Casper Landsten-UIA (B). Casper Landsten is a foreign exchange trader for a bank in New York. Using the values and assumptions below, he decides to seek the full 4.801% return available in U.S. dollars by not covering his forward dollar receipts - an uncovered interest arbitrage (UIA) transaction. The uncovered interest arbitrage (UIA) profit amount is$ ______(round to nearest cent)
Arbitrage funds available | $ | 1,100,000 | |
Spot exchange rate (SFr/$) | 1.2809 | ||
3-month forward rate (SFr/$) | 1.2744 | ||
Expected spot rate in 90 days (SFr/$) | 1.2699 | ||
U.S. Dollar annual interest rate | 4.801 | % | |
Swiss franc annualinterest rate | 3.195 | % |
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