Question: XXXXX, using the same values and assumptions as in the previous question, now decides to seek the full 4.800% return available in US dollars by

XXXXX, using the same values and assumptions as in the previous

XXXXX, using the same values and assumptions as in the previous question, now decides to seek the full 4.800% return available in US dollars by not covering his forward dollar receipts -- an uncovered interest arbitrage (UIA) transaction. Assess this decision. Value Ser: Equivalent SFr. 1.281.000 $1.000.000 1,2810 Assumptions Arbitrage funds available Spot exchange rate (SFr./$) 3-month forward rate (SFr./$) Expected spot rate in 90 days (SFr./$) U.S. dollar 3-month interest rate Swiss franc3-month interest rate 1,2740 1,2700 4,800% 3,200%

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