(a) Jade Smith is a foreign exchange trader for a bank in New York. He has $1 million for a short-term money market investment and he faces the following quotes: (Assuming there are 360 days a year)

Spot exchange rate (SFr/$)	1.2810
3-month forward rate (SFr/$)	1.2740
US dollar annual interest rate	4.8%
Swiss franc annual interest rate	3.2%

He wonders whether he should invest in US dollars for 90 days or make a covered interest arbitrage (CIA) investment in the swiss franc, and what is the profit/loss if he carries out this investment. (7 Marks)

(b) Using the same values in the table above, Jade decides to seek the full 4.8% return available in the US dollars by not covering his forward dollar receipts an uncovered interest arbitrage (UIA) transaction. What is the maximum expected spot exchange rate (SFr/$) at the end of the 90-day period at which Jade can avoid losing money? (6 Marks)

Please Provide correct steps and explanations. there is only one answer for this question on chegg and is incomplete please provide a good answer.

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