Question

In: Finance

Casper Landsten is a foreign exchange tender. He has $1 million​ (or its Swiss franc​ equivalent)...

Casper Landsten is a foreign exchange tender. 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:

Arbitrage funds available

$

1,000,000

Spot exchange rate (SFr/$)

1.2807

3-month forward rate (SFr/$)

1.2739

U.S. Dollar annual interest rate

4.795

%

Swiss franc annual interest rate

3.203

%

The CIA profit potential is 0.543%. What is the CIA profit amount in $?

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

1-Exchange rate for Turkish Lira (TL) is $2 Exchange rate for Swiss Franc is $4 The...
1-Exchange rate for Turkish Lira (TL) is $2 Exchange rate for Swiss Franc is $4 The cross rate between franc and TL is 3 francs per TL. Is there an triangle arbitrage opportunity to make profit? True False 2-Exchange rate for Turkish Lira (TL) is $2 Exchange rate for Swiss Franc is $4 The cross rate between franc and TL is 3 francs per TL. How much profit would you make at most if you have $100? A-$200 B-$400 C-$500...
1. Exchange rate for Turkish Lira (TL) is $2 Exchange rate for Swiss Franc is $4...
1. Exchange rate for Turkish Lira (TL) is $2 Exchange rate for Swiss Franc is $4 The cross rate between franc and TL is 3 francs per TL. Is there an triangle arbitrage opportunity to make profit? 2. Exchange rate for Turkish Lira (TL) is $2 Exchange rate for Swiss Franc is $4 The cross rate between franc and TL is 3 francs per TL. How much profit would you make at most if you have $100?
In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc).
In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc). Interest rates in the United States and Switzerland were 0.25% and 0% per annum, respectively, with continuous compounding. The 3-month forward exchange rate was 1.0300 ($ per franc). What arbitrage strategy was possible? How does your answer change if the forward exchange rate is 1.0500 ($ per franc).
A bank is quoting the following exchange rates against thedollar for the Swiss franc and...
A bank is quoting the following exchange rates against the dollar for the Swiss franc and the Australian dollar (i.e., in European terms): SFr/$ = 1.5150-60 and A$/$ = 1.6345-55. An Australian firm asks the bank for a SFr/A$ quote in Swiss terms. What cross-rate would the bank quote?
Casper​ Landsten-UIA (B).   Casper Landsten is a foreign exchange trader for a bank in New York....
Casper​ Landsten-UIA (B).   Casper Landsten is a foreign exchange trader for a bank in New York. Using the values and assumptions​ below, he decides to seek the full 4.804​% return available in U.S. dollars by not covering his forward dollar receiptslong dash—an uncovered interest arbitrage​ (UIA) transaction. Assess this decision. Arbitrage funds available $ 950,000 Spot exchange rate (SFr/$) 1.2811 3-month forward rate (SFr/$) 1.2742 Expected spot rate in 90 days (SFr/$) 1.2697 U.S. Dollar annual interest rate 4.804 %...
Casper​ Landsten-UIA (B). Casper Landsten is a foreign exchange trader for a bank in New York....
Casper​ Landsten-UIA (B). Casper Landsten is a foreign exchange trader for a bank in New York. Using the values and assumptions​ below, he decides to seek the full 4.798 return available in U.S. dollars by not covering his forward dollar receipts —an uncovered interest arbitrage​ (UIA) transaction. Assess this decision. Arbitrage funds available $ 1,100,000 Spot exchange rate (SFr/$) 1.2809 3-month forward rate (SFr/$) 1.2744 Expected spot rate in 90 days (SFr/$) 1.2704 U.S. Dollar annual interest rate 4.798 %...
Q6) In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was...
Q6) In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc). Interest rates in the U.S. and Switzerland were 0.25% and 0% per annum, respectively, with continuous compounding. The three-month forward exchange rate was 1.0300 ($ per franc). What arbitrage strategy was possible?
In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404...
In early 2012, the spot exchange rate between the Swiss Franc and U.S. dollar was 1.0404 ($ per franc). Interest rates in the U.S. and Switzerland were 0.25% and 0% per annum, respectively, with continuous compounding. The three-month forward exchange rate was1.0300 ($ per franc). What arbitrage strategy was possible? How does your answer change if the exchange rate is 1.0500 ($ per franc).
Why the Swiss National Bank (SNB) decided to abandon its managed Swiss franc floor against the...
Why the Swiss National Bank (SNB) decided to abandon its managed Swiss franc floor against the euro last January 2015?
Horst Schmidt is considering buying ten call options on Swiss franc on the Philadelphia Stock Exchange...
Horst Schmidt is considering buying ten call options on Swiss franc on the Philadelphia Stock Exchange at a strike price of 54 cents per pound.  The contract size is SF62, 500.  The option will expire in three months.  The premium is 2.0 cents per pound.  Ignore the brokerage cost.  The spot rate is currently $.5400/SF and the three-month forward rate is $.5525/SF. Horst Schmidt believes that the most likely range for the spot pound in three months will be a low of $.5000/SF to a...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT