Spot exchange rate

Six$-$month forward exchange rate SFr$1\mathrm{.}2053$ per $

Six$-$month Dollar interest SFr$1\mathrm{.}1924$ per $

Six$-$month Swiss franc interest rate

$2\mathrm{.}5\%$ per year

$2\mathrm{.}0\%$ per year

Required:

a$.$ Is the interest rate parity holding? You may ignore transaction costs.

b$.$ What steps should be taken to make arbitrage profit? Assuming that James Clark is authorized to work with $$1,000,000.$ Compute the arbitrage profit.

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.

Required $A$

Required B

What steps should be taken to make arbitrage profit? Assuming that James Clark is authorized to work with $$1,000,000.$ Compute the arbitrage profit.

Note: Round off the final answer to nearest whole dollar.

$\backslash$table$[[\backslash$table$[[$What steps should be taken to make arbitrage$],[$profit$?]],\backslash$table$[[$Borrow at the dollar interest rate and invest at the Swiss franc rate. Hedge$],[$exchange rate risk by selling Swiss francs forward.$]]],[$Arbitrage profit,$