Annual interest rates in the U.S. and Switzerland are 10 percent (10%) in the USA and 4

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Annual interest rates in the U.S. and Switzerland are 10 percent (10%) in the USA and 4 percent (4%) in Switzerland respectively, and the prevailing current rate is $0.3864/Swiss franc.

I) What is the 90-day forward rate if the equivalence of interest rates applies?

ii) You notice that the 90-day forward rate is $0.3902/Swiss franc.

Is it possible to conduct arbitrage?

Indicate the steps you would follow to carry out this kind of arbitrage?

Related Book For answer-question

International Finance Theory and Policy

ISBN: 978-0133423648

10th edition

Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz

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Posted Date: Jun 12, 2023 01:44 AM

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Annual interest rates in the U.S. and Switzerland are 10 percent (10%) in the USA and 4

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To determine the 90day forward rate using the equivalence of interest rates we can use the interest ... View the full answer

International Finance Theory and Policy

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