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Suppose that a trader has a credit line of $10,000,000 (or its Swiss franc equivalent) for a short-term money market investment and she decides to
Suppose that a trader has a credit line of $10,000,000 (or its Swiss franc equivalent) for a short-term money market investment and she decides to make a covered interest arbitrage investment in the Swiss franc. Please use the following values to calculate her arbitrage profit. Spot exchange rate (SFr./$) 1.2810 3-month forward rate (SFr./$) 1.2725 U.S. dollar 3-month interest rate (per annum) 4.800% Swiss franc 3-month interest rate (per annum) 3.200%
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