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International Financial Management
14th Edition
ISBN:9780357130698
Author:Madura
Publisher:Madura
Chapter21: International Cash Management
Section: Chapter Questions
Problem 3ST
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Assume the following information:
Spot rate today of Swiss franc
$.60
%D
1-year forward rate as of today for Swiss
$.63
franc
Expected spot rate 1 year from now
$.64
Rate on 1 year deposits denominated in
7%
Swiss francs
Rate on 1 year deposits denominated in
9%
U.S. dollars
From the perspective of Swiss investors with
SF1,000,000, covered interest arbitrage would yield a
rate of return of
%.
Show how you calculate your answer.
II
Transcribed Image Text:Assume the following information: Spot rate today of Swiss franc $.60 %D 1-year forward rate as of today for Swiss $.63 franc Expected spot rate 1 year from now $.64 Rate on 1 year deposits denominated in 7% Swiss francs Rate on 1 year deposits denominated in 9% U.S. dollars From the perspective of Swiss investors with SF1,000,000, covered interest arbitrage would yield a rate of return of %. Show how you calculate your answer. II
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