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Peder Mueller is a foreign exchange trader for a bank in New York. He has USD8364918 (or its Swiss franc equivalent) for a short-term money
Peder Mueller is a foreign exchange trader for a bank in New York. He has USD8364918 (or its Swiss franc equivalent) for a short-term money market investment and wonders whether he should invest in U.S. dollars for three months or make a CIA investment in the Swiss franc (CHF). He faces the following quotes: Spot exchange rate (CHF = USD1.00) 1.2810 3-month forward rate (CHF = USD1.00) 1.2740 U.S. dollar 3-month interest rate 4.800 % Swiss franc 3-month interest rate 3.200 % What is arbitrage profit? Round to the nearest dollar/CHF.
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