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Copenhagen Covered (A). Heidi Hi Jensen, a foreign exchange trader at J.P. Morgan Chase, can...

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Finance

Copenhagen Covered (A). Heidi Hi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest

$4.9 million, or the foreign currency equivalent of the bank's short term funds, in a covered interest arbitrage with Denmark. Using the following quotes, can Heidi make a covered interest arbitrage (CIA) profit?

Arbitrage funds available

$

4,900,000

Spot exchange rate (kr/$)

6.1724

3-month forward rate (kr/$)

6.1977

U.S. dollar annual interest rate

2.950

%

Danish krone annual interest rate

5.050

%

Answer & Explanation Solved by verified expert
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