Question: John Low, a foreign exchange trader at J.P. Morgan Chase, is exploring covered interest arbitrage possibilities. He wants to invest $6 million, or the foreign

John Low, a foreign exchange trader at J.P. Morgan Chase, is

John Low, a foreign exchange trader at J.P. Morgan Chase, is exploring covered interest arbitrage possibilities. He wants to invest $6 million, or the foreign currency equivalent of the bank's short-term funds, in a covered interest arbitrage with the Danish kroner. Using the following quotes can John Low make covered interest arbitrage (CIA) profit? Assumptions Arbitrage funds available Spot exchange rate (kr/$) 3-month forward rate (kr/$) US dollar 3-month interest rate Danish kroner 3-month interest rate Value $6,000,000 6.1720 6.1980 3.000% 5.000% (14 marks)

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