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U.S. investors have $500,000 to invest: - 1-year deposit rate offered by U.S. banks = 4% 1-year deposit rate offered by Swiss banks = 7%

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U.S. investors have $500,000 to invest: - 1-year deposit rate offered by U.S. banks = 4% 1-year deposit rate offered by Swiss banks = 7% Spot Rate on Swiss franc = $0.7 - 1-year forward rate of Swiss franc = $0.69 1. Explain how the U.S. investor could profit from covered interest arbitrage strategy. 2. Calculate the percentage of the return from the strategy. 3. If interest rate parity condition holds, what would be the 1-year forward rate

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