Prestige International, a swiss watch manufacturer exports sports and premium wrist and smart watches to the U.S. In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc). While they are usually happy about their exports being billed in US Dollars, but due to the recent fluctuation in exchange rates, the company has taken a toll on their net receipts when converted into Swiss Francs.

Interest rates in the U.S. and Switzerland were 0.25% and 0% per annum respectively, with continuous compounding. The three-month forward exchange rate was1.0300 ($ per franc).

Ms. Saleha, the CFO of the company has asked you to devise strategy where arbitrage is possible on the current scenario. What arbitrage strategy was possible? How does your answer change if the exchange rate is 1.0500 ($ per franc).