Question
Covered Interest Arbitrage 15 pts Spot Exchange Rate 1 CHF = 0.85 USD US Interest Rate 4% per annum Swiss Interest Rate 5% per annum
Covered Interest Arbitrage 15 pts
| Spot Exchange Rate | 1 CHF = 0.85 USD |
| US Interest Rate | 4% per annum |
| Swiss Interest Rate | 5% per annum |
| Time Horizon | 6 months |
| Forward Exchange Rate | 1 CHF = 0.9 USD |
1. What is the theoretical 6 month forward exchange rate?
2. How to set up arbitrage and how much is your PROFIT, please write out each step and add currency symbol next to your answer at each step.
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Corporate Financial Management
Authors: Douglas R. Emery, John D. Finnerty, John D. Stowe
4th Edition
1935938002, 9781935938002
