The interest rate on three-month Eurodollar deposits is 11 7/16 to 11 9/16 percent (bid/asked), while that on three-month euro-SF deposits is 5 5/16 to 5 7/16 percent. Spot exchange is available at SF3.0215 - 3.0280/US$ while three-month forward is available at SF2.9852 - 2.9910/US$.Is there an arbitrage opportunity from borrowing either Swiss francs or dollars? If so, explain the steps that would be taken to exploit the arbitrage opportunity. What profit would be obtained from 1 million units of currency?At what point in time would this profit be realized? 

Answer rating: 100% (QA)

To determine if there is an arbitrage opportunity we need to compare the interest rate differentials and the forward exchange rates Lets evaluate the ... View the full answer