Question
Please answer both parts A1. James Clark is a foreign exchange trader with Citibank. He notices the following quotes. __________________________________________________________________________________________________ Spot exchange rate USD1.2051/SFr Six-month
Please answer both parts
A1. James Clark is a foreign exchange trader with Citibank. He notices the following quotes.
__________________________________________________________________________________________________
Spot exchange rate USD1.2051/SFr
Six-month forward exchange rate USD1.1922/SFr
Six-month $ interest rate 8% per year
Six-month SFr interest rate 10% per year ___________________________________________________________________________________________________
Is the interest rate parity holding? You may ignore transaction costs.
A. yes
B. no
A2.James Clark is a foreign exchange trader with Citibank. He notices the following quotes.
__________________________________________________________________________________________________
Spot exchange rate USD1.2051/SFr
Six-month forward exchange rate USD1.1922/SFr
Six-month $ interest rate 8% per year
Six-month SFr interest rate 10% per year ___________________________________________________________________________________________________
Is there an arbitrage opportunity? If yes, determine the arbitrage profit in Swiss Francs. Assume that James Clark is authorized to work with $1,000,000. Input your answer without any currency information.
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Business Analysis And Valuation Using Financial Statements Text And Cases
Authors: Krishna G. Palepu, Paul M. Healy, Victor Lewis Bernard, W.Gordon Filby
2nd Edition
0324015658, 9780324015652
