Question
Heidi Hi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $5.055.05 million, or the foreign currency equivalent of the bank's short termfunds,
Heidi Hi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $5.055.05 million, or the foreign currency equivalent of the bank's short termfunds, in a covered interest arbitrage with Denmark. Using the following quotes, can Heidi make a covered interest arbitrage (CIA) profit?
| Arbitrage funds available | $ | 5,050,000 | |
| Spot exchange rate (kr/$) | 6.1724 | ||
| 3-month forward rate (kr/$) | 6.1975 | ||
| U.S. dollar annual interest rate | 2.950 | % | |
| Danish krone annual interest rate | 4.950 | % |
Heidi Hi Jensen generates a covered interest arbitrage (CIA) profit of $.......
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Probability For Risk Management
Authors: Matthew J. Hassett, Donald G. Stewart
2nd Edition
156698548X, 978-1566985482
