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please calculate the blue boxes Heidi Hai Jensen, a forcign exchange trader at J.P. Morgan Chase, can invest $5 million, or the fortign currency equivalent
please calculate the blue boxes
Heidi Hai Jensen, a forcign exchange trader at J.P. Morgan Chase, can invest $5 million, or the fortign currency equivalent of the bank's short term funds, in a covered interes arbitrage with Denmark. Using the following quotes can Heidi make covered interest arbitrage (CIA) profit? Arbitrage Rule of Thumb: tf the difference in interest rates is greater than the fonward promium/discount, or epectal change in the spat rate for ULA, invert in the higher inferet yidding currency. If the difference in interest rates is less than the fonvard premium (or eqpected change in the spot rate) invert in the lower yielding currency. Difference in interest rates (ikr - IS) Forward discount on the krone CIA profit potential This teils Heidi Hai Jersen that he should botrow dollan and invest in the higher yielding currency the Dunish kroner, for ClA profit Step by Step Solution
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