Question: 6. A foreign exchange trader at J.P. Morgan Chase, can borrow up to $5 million, or the foreign currency equivalent, of the bank's short term

6. A foreign exchange trader at J.P. Morgan Chase, can borrow up to $5 million, or the foreign currency equivalent, of the bank's short term funds, for the purpose of a covered interest arbitrage with the Danish krone. (a) Using the following quotes, can the trader make covered interest arbitrage (CIA) profit? (b) What actions and steps should he or she take in order to achieve an arbitrage profit? (c) What will be the expected profit from these steps?

Arbitrage funds available $5,000,000
Spot exchange rate (kr/$)	6.640
3-month forward rate (kr/$)	6.680
U.S. dollar 3-month interest rate	1.60%
Danish kroner 3-month interest rate	4.40%

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