Question
Copenhagen Covered (A). Heidi Hi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $5.1 million, or the foreign currency equivalent of the
Copenhagen Covered (A). Heidi Hi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $5.1 million, or the foreign currency equivalent of the bank's short term funds, in a covered interest arbitrage with Denmark. Using the following quotes, can Heidi make a covered interest arbitrage (CIA) profit?
| Arbitrage funds available | $ | 5,100,000 | |
| Spot exchange rate (kr/$) | 6.1718 | ||
| 3-month forward rate (kr/$) | 6.1978 | ||
| U.S. dollar annual interest rate | 3.000 | % | |
| Danish krone annual interest rate | 4.900 | % |
The CIA profit potential is _____%
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Finance For Housing An Introduction
Authors: Cathy Davis
1st Edition
1447306481, 978-1447306481
