Purchase Solution

Covered Interest Arbitrage in Annualized Terms

Not what you're looking for?

Ask Custom Question

Mary Joe has a credit line of $1,000,000 (or equivalent in major currencies) for arbitrage. She had access to the following rates, and she managed to generate CIA profits. Replicate her arbitrage and calculate her profits based on the following rates:
Assumptions
Value
SFr. Equivalent
Arbitrage funds available
$1,000,000
SFr. 1,281,000
Spot exchange rate (SFr./$)
1.2810
3-month forward rate (SFr./$)
1.2740
U.S. dollar 3-month interest rate
4.800%
pa
Swiss franc3-month interest rate
3.200%
pa

Note that interest rates are expressed in annualized terms!
A. $1,538.46
B. SFr 1,538.46
C. $1936.44
D. SFr 1936.44

Purchase this Solution

Solution Summary

The solution solves a covered interest arbitrage question with step-by-step workings and explanations in an excel file.

Purchase this Solution


Free BrainMass Quizzes
Lean your Process

This quiz will help you understand the basic concepts of Lean.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Motivation

This tests some key elements of major motivation theories.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Operations Management

This quiz tests a student's knowledge about Operations Management