Homework:Chapter 6 Homework

Question 6, Problem 6-14 (book/static)

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Casper Landsten-Thirty Days Later. Casper Landsten once again has

$1

million (or its Swiss franc equivalent) to invest for three months. He now faces the following rates. Should he enter into a covered interest arbitrage (CIA) investment?

Arbitrage funds available	$	1,000,000
Spot exchange rate (SFr/$)		1.3392
3-month forward rate (SFr/$)		1.3286
U.S. Dollar annual interest rate		4.750	%
Swiss franc annual interest rate		3.625	%

The CIA profit potential is %,

which tells Casper Landsten he should borrow