Casper Landsten once again has $0.9million (or its Swiss franc equivalent) to invest for three...
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Casper Landsten once again has $0.9million (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 $900,000
Spot exchange rate (sFr/$) 1.3394
3-month forward rate (sFr/$) 1.3287
US Dollar Int. rate 4.752%
Swiss Franc annual Int rate 3.627%
The CIA Profit potential is ____%, which tells Casper Landsten he should borrower ______(Swiss Francs or US Dollars) and invest in the ____(higher or lower) yielding currency, the ____(Swiss Franc or US Dollar) and then sell the ____ (Swiss Franc or US Dollar) principal and interest forward 3 months locking in a CIA profit. (Round to three decimals and select from the drop downs. - Drop Down selects are in parathesis
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