(a) A foreign exchange trader at J.P. Morgan Chase, can invest $5 million, or the foreign currency equivalent of the bank's short term funds, in a covered interest arbitrage with Denmark. Using the following quotes can Heidi make covered interest arbitrage (CIA) profit? Show all the steps involved in the arbitrage Assumptions Arbitrage funds available Spot exchange rate (kr/S) 3-month forward rate (kr/$) US dollar 3-month interest rate Danish kroner 3-month interest rate Value $5,000,000 6.1720 6.1 980 3.000% 5.000% (b) The same trader observes that the kr/S spot rate has been holding steady, and both the US dollar and Danish krone interest rates have remained relatively fixed over the past week. He wonders if he should try an uncovered interest arbitrage (UIA) and thereby save the cost of forward cover. Many of his research associates -- and their computer models -- are predicting the spot rate to remain close to kr 6.18/S for the coming .3 months. Using the same data as in (a), find the UIA profit in USD and KRONE Show all the steps involved in the arbitrage (a) A foreign exchange trader at J.P. Morgan Chase, can invest $5 million, or the foreign currency equivalent of the bank's short term funds, in a covered interest arbitrage with Denmark. Using the following quotes can Heidi make covered interest arbitrage (CIA) profit? Show all the steps involved in the arbitrage Assumptions Arbitrage funds available Spot exchange rate (kr/S) 3-month forward rate (kr/$) US dollar 3-month interest rate Danish kroner 3-month interest rate Value $5,000,000 6.1720 6.1 980 3.000% 5.000% (b) The same trader observes that the kr/S spot rate has been holding steady, and both the US dollar and Danish krone interest rates have remained relatively fixed over the past week. He wonders if he should try an uncovered interest arbitrage (UIA) and thereby save the cost of forward cover. Many of his research associates -- and their computer models -- are predicting the spot rate to remain close to kr 6.18/S for the coming .3 months. Using the same data as in (a), find the UIA profit in USD and KRONE Show all the steps involved in the arbitrage