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The Swiss franc and US dollar spot exchange rates were 1.0404 (dollar per franc). On a continuous welfare basis, interest rates were 0.25% per year
The Swiss franc and US dollar spot exchange rates were 1.0404 (dollar per franc). On a continuous welfare basis, interest rates were 0.25% per year in the United States and 0.02% per year in Switzerland. The three-month forward exchange rate was 1.0300 (dollar per franc). What arbitrage opportunities will arise? Use arbitrage opportunities to create a profit-generating strategy and create cash flows and returns from the present to maturity.
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