Covered Interest Arbitrage Illustration 6
USD/CHF Spot 1.3715
73 days forward USD/CHF 1.3675
CHF interest rate 1.5% per annum
USD interest rate 4.00% per annum
Identify and calculate interest rate, arbitrage if any. (April 2007)
(Ans.: Borrow Home (CHF) and Invest Foreign (USD), Gain 20,602)
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