Libor + 4basis = 0.38% + 0.04%

Questilon 3 You have SGD 5 million to invest for 3 months (91 days). Two choices are given to you: . aUSD 3-month commercial paper which can be hedged back into SGD by means Given that the current quotes are as follows: a SGD deposit of a covered interest arbitrage Instrument spot USDSGD 3-month swap 3-month SGD interest rate | 0.25%0.27% 3-month USD interest rate | 0.35%0.38% Quotes 1.4066/70 80/70 and that the yield of the commercial paper is USD LIBOR + 4 basis points. Calculate the difference in absolute returns from the two investment choices, assuming that the commercial paper may be bought and the covered interest arbitrage can be carried t with no restriotion on amounts. Note: SGD money market basis is ACT/365) (10 marks)