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

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Copenhagen Covered (B). Heidi Hi Jensen, a foreign exchange trader at J.P. Morgan Chase, can invest $5 million, or the foreign currency equivalent of the bank's short term funds, in a covered interest arbitrage with Denmark. She is now evaluating the arbitrage profit potential in the same market after interest rates change. (Note that anytime the difference in interest rates does not exactly equal the forward premium, it must be possible to make CIA profit one way or another.) Arbitrage funds available $ 5,000,000 6.1719 Spot exchange rate (kr/$) 3-month forward rate (kr/$) 6.1979 U.S. dollar annual interest rate 4.000 % Danish krone annual interest rate 5. 100 % interest rate currency, gaining on the re-exchange of dollars 5 The CIA profit potential is %, which tells Heidi that she should borrow and invest in the for krone at the end of the period. (Round to three decimal places and select from the drop-down menus.)

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