12. Casper Landsten CIA. Casper Landsten is a foreign exchange trader for a bank in New York. He has $1 million (or its Swiss franc equivalent) for a short-term money market investment and wonders if he should invest in U.S. dollars for three months, or make a CIA investment in the Swiss franc. He faces the following quotes:
13. Casper Landsten UIA. Casper Landsten, using the same values and assumptions as in problem 12, decides to seek the full 4.800% return available in U.S. dollars by not covering his forward dollar receipts an uncovered interest arbitrage (UIA) transaction. Assess this decision.
Give $1000,000 and the following information
Spot Rate(SFr/$)
1.2810
3-Month forward rate(SFr/$)
1.2740
US-dollar 3-Month interest rate
4.800%
Swiss Franc 3-Month interest rate
3.200%
12. Casper Landsten CIA. Casper Landsten is a foreign exchange trader for a bank in New York. He has $1 million (or its Swiss franc equivalent) for a short-term money market investment and wonders if he should invest in U.S. dollars for three months, or make a CIA investment in the Swiss franc. He faces the following quotes:
13. Casper Landsten UIA. Casper Landsten, using the same values and assumptions as in problem 12, decides to seek the full 4.800% return available in U.S. dollars by not covering his forward dollar receipts an uncovered interest arbitrage (UIA) transaction. Assess this decision.
Give $1000,000 and the following information
|
Spot Rate(SFr/$) |
1.2810 |
|
3-Month forward rate(SFr/$) |
1.2740 |
|
US-dollar 3-Month interest rate |
4.800% |
|
Swiss Franc 3-Month interest rate |
3.200% |
