3.CIA Susan Prescott is a foreign exchange
trader for a bank in New York. She has...
60.2K
Verified Solution
Link Copied!
Question
Finance
3.CIA Susan Prescott is a foreign exchangetrader for a bank in New York. She has $1 million (or its Swissfranc equivalent) for a short term money market investment andwonders if she should invest in U.S. dollars for three months, ormake a covered interest arbitrage (CIA) investment in the Swissfranc. She faces the following quotes:
Assumptions
Value
SFr. Equivalent
Arbitrage funds available
$1,000,000
SFr. 994,000
Spot exchange rate (SFr./$)
                   .9940
3-month forward rate (SFr./$)
                   .9910
U.S. dollar 3-month interest rate
2.600% pa
Swiss franc3-month interest rate
1.600% pa
What should Susan do?
Answer & Explanation
Solved by verified expert
4.4 Ratings (668 Votes)
Arbitrage fund available 1000000 or SFr 994000 USD Interest Rate 26 per annum Swiss France Interest Rate 13 Spot Rate SFr 0994 and Forward Rate SFr 0991 In order to
See Answer
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
