Given the following information: Spot rate of Swiss Franc .$ 0.80 The forward rate of Swiss Franc

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Given the following information:

Spot rate of Swiss Franc ………………………………………………………………….$ 0.80

The forward rate of Swiss Franc …………………………………………………..…$ 0.79

The interest rate on Swiss Franc deposits…………………………………………. 4 %

The interest rate on US dollar deposits…………………..…………………….…. 2.5 %

what rate of return can be earned on $1m from covered interest arbitrage? Is it a worthwhile undertaking?

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Exchange Rates and International Finance

ISBN: 978-0273786047

6th edition

Authors: Laurence Copeland

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Question Posted: Apr 03, 2019 11:49 AM

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Given the following information: Spot rate of Swiss Franc .$ 0.80 The forward rate of Swiss Franc

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Convert 1000000 at 08 givesSF 1250000 LendSF 1250000 at 400 givesSF 1300000 Sell forwardSF ...View the full answer

Exchange Rates and International Finance

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