Problem $6$

The following indirect quotation of Swiss franc to British pound is given: SFr $/=2\mathrm{.}2714.$ The

$1-$year futures contract rate is set at the level of $2\mathrm{.}2784.$ Interest rates in Britain and Switzerland

are $4\mathrm{.}7\%$ and $4\%$ respectively. Is there an interest rate arbitrage opportunity in this case?

Describe the arbitrage transactions step$-$by$-$step. What the annual interest rate in Switzerland

should be to disable the interest rate arbitrage?