Mary Argent is a foreign exchange trader for a bank in New York. She has Si million (or its Swiss franc equivalent) for a short term money market investment and wonders if she should invest in U.S.dollars for three months, or make a covered interest arbitrage investment in the Swiss franc. She faces the following quotes:$1,000,0001.2810Arbitrage funds availableSpot exchange rate (SFr./S)3-month forward rateSFr./$)U.S. dollar 3-month interestrateSwiss franc3-month Interestrate1.27404.800%3.200%She should Borrow:A 780,600 SF franes (SWISS)B. 1.281.000 USD (US dollars)C. 1.281.000 SF franes (SWISS)D. TBO.000 USD (US dollars)

In the question above, it is given that : Mary Argent is a foreign exchange trader for a bank in…

Mary Argent is a foreign exchange trader for a bank in New York. She has Si milion (or its Swiss franc equivalent) for a short term money market investment and wonders if she should invest in US. dollars for three months, or make a covered imterest arbitrage investment in the Swiss franc. She faces the following quotes: Arbitrage funds avallable Spot exchange rate (SFr./5) 3-month forward rate SF/S) TS. dollar 3-month interest $1,000,000 1.2810 1.2740 4.800% rate Swiss franc3-month Interest 3.200% rate She should Borrow A 780.600 SF francs (SWISS) B. 1281.000 USD (US dollars) C. 1.281.000 SF francs (SWISS) D. THOcos USD (US dollars)

Mary Argent is a foreign exchange trader for a bank in New York. She has Si milion (or its Swiss franc equivalent) for a short term money market investment and wonders if she should invest in US. dollars for three months, or make a covered imterest arbitrage investment in the Swiss franc. She faces the following quotes: Arbitrage funds avallable Spot exchange rate (SFr./5) 3-month forward rate SF/S) TS. dollar 3-month interest $1,000,000 1.2810 1.2740 4.800% rate Swiss franc3-month Interest 3.200% rate She should Borrow A 780.600 SF francs (SWISS) B. 1281.000 USD (US dollars) C. 1.281.000 SF francs (SWISS) D. THOcos USD (US dollars)

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter36: Exchange Rates And Financial Links Between Countries

Section: Chapter Questions

Problem 13E

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