Question
Salem Ali, a foreign exchange trader at J.P. Morgan Chase, can invest $5 million, or the foreign currency equivalent of the bank's short-term funds, in
| Salem Ali, a foreign exchange trader at J.P. Morgan Chase, can invest $5 million, or the foreign currency equivalent of the bank's short-term funds, in a covered interest arbitrage with Denmark. He has the following quotes: | |||||||
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| Assumptions |
| Value |
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| Arbitrage funds available |
| $5,000,000 |
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| Spot exchange rate (kr/$) |
| 6.1720 |
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| 3-month forward rate (kr/$) |
| 6.1980 |
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| US dollar 3-month interest rate |
| 3.000% |
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| Danish kroner 3-month interest rate | 5.000% |
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Required:
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International Financial Management
Authors: Geert Bekaert, Robert J. Hodrick
2nd edition
013299755X, 132162768, 9780132997553, 978-0132162760
