H5. 1) The ER between the Swiss franc and the US dollar is one to one in the spot market. The interest rates in Switzerland and the US are -.01 and .03 respectively. Swiss franc. What kind of arbitrage will induce a profit for you, if the forward rate is 1.05 Swiss francs equal $1? Assume you start with $1 million. 2) Expound on interest parity theory in the aforementioned context. Is the above situation sustainable?

Managerial Economics: A Problem Solving Approach
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Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
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Chapter11: Foreign Exchange, Trade, And Bubbles
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H5. 1) The ER between the Swiss franc and the US dollar is one to one in the spot market. The interest rates in Switzerland and the US are -.01 and .03 respectively. Swiss franc. What kind of arbitrage will induce a profit for you, if the forward rate is 1.05 Swiss francs equal $1? Assume you start with $1 million. 2) Expound on interest parity theory in the aforementioned context. Is the above situation sustainable?
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