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/$) | 6.1718 | ||
3-month forward rate (kr/$) | 6.1982 | ||
U.S. dollar annual interest rate | 3.100 | % | |
Danish krone annual interest rate | 5.050 | % |
The CIA profit potential is _____%, which tells Heidi Hi Jensen that she should borrow______and invest in the higher yielding currency the______for CIA profit.
,(Round to three decimal places and select from the drop-down menus.)
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