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copenhagen Covered (A). Heidi Hi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $5 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 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 | $ | 5,000,000 | |
Spot exchange rate (kr/$) | 6.1719 | ||
3-month forward rate (kr/$) | 6.1979 | ||
U.S. dollar annual interest rate | 3.050 | % | |
Danish krone annual interest rate | 5.050 | % |
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