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Heidi Hoi Jensen, a foreign exchange trader at JPMorgan Chase, can invest $ 5 million, or the foreign currency equivalent of the bank's short -
Heidi Hoi Jensen, a foreign exchange trader at JPMorgan Chase, can invest $ million, or the foreign currency equivalent of the bank's shortterm funds, in a covered interest arbitrage with Denmark. Using the following quotes.
Spot exchange rate kr$:
month forward rate kr$:
US dollar month interest rate: per year
Danish kroner month interest rate: per year
Should this investor enter into a covered interest arbitrage investment? Calculate the profit difference on CIA compare alternative investments
According to answer calculate profits or losses and the overall return of the CIA transaction.
Is the Danish krone appreciating or depreciating? Explain. Calculate the premium or discount of the Swiss franc.
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